The Office of National Statistics’ upward revision of GDP for the second quarter indicates that the UK is not in recession, as projected by the Bank of England earlier this month, but is below its pre-pandemic peak, contrary to earlier estimates that it had recovered.
The British economy expanded by 0.2% in the three months leading up to June, contrary to the initial prediction of a 0.1% decline.
The Office of National Statistics’ higher adjustment of GDP for the second quarter indicates that the United Kingdom is not in recession, contrary to what the Bank of England forecast earlier this month.
The economy enters a technical recession when it experiences two consecutive quarters of decline.
The chief economist of the ONS, Grant Fitzner, stated, “These revised numbers indicate that the economy increased in the second quarter.
“They also indicate that, despite a decline in family savings in the most recent quarter, households saved more during and after the epidemic than we had previously predicted.”
According to the ONS, the gain was driven by improvements in the health and financial sectors.
Even though the economy grew in the second quarter, it remained below its pre-coronavirus peak, contrary to earlier projections that it had recovered, highlighting the magnitude of the problem facing Prime Minister Liz Truss.
The ONS scaled down its projection for Britain’s recovery from the COVID-19 pandemic, reflecting a greater impact on the economy in 2020 when health lockdowns shut down enterprises nationwide.
“The level of real GDP is now anticipated to be 0.2% below where it was pre-coronavirus for the fourth quarter of 2019, a downward revision from previous forecasts of 0.6% higher,” the report stated.
The ONS now estimates that the UK economy contracted by 11% in the year that the coronavirus struck, a more severe decline than the prior estimate of 9.8%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, stated that the data indicated that the damage to the economy’s growth potential caused by the epidemic and Brexit was significantly worse than previously estimated.
“These changes will require the Office for Budget Responsibility to substantially reduce its projections for future potential GDP,” he said.
The most recent data is a response to the upheaval in the financial markets and fears of skyrocketing mortgage payments caused by the government’s mini-budget.
The instability has refocused attention on the country’s substantial current account deficit.
The current account deficit decreased to £33.8 billion between April and June.
Economists expected a deficit of almost £44 billion.
The shortfall was less than the £43.9bn deficit in the first quarter, which was revised down from a previous estimate in part because energy companies, spurred by rising prices, made more profit abroad than previously estimated.
The ONS reported that the January-March deficit remained the largest on record.
