The boom in domestic holidays fuelled a rebound in Britain's economy in August as bars, restaurants and festivals benefited from the easing of most remaining Covid restrictions during the height of summer.
the office for national statistics ( ons ) said gross domestic product rose by 0.4 % in august compared with the previous month as consumers increased their spending on leisure during the first full month without domestic government restrictions in england.
However, the ONS cut its growth estimate for July from a monthly rise of 0.1 % to a fall of the same amount after fresh economic data revealed a worse hit for car manufacturing caused by global supply chain problems and shortages in computer chips, also known as semiconductors.
Reflecting a boom for holidaying in the UK while international travel restrictions largely remained in place, the latest snapshot showed activity in accommodation and food services, as well as the arts, entertainment and recreation, contributed the most to growth in the service sector of the economy.
The accommodation sector grew by 23 % on the month, driven by spending at hotels and campsites during the key month of the school holidays for holiday destinations across the country.
Although air transport continued to expand as restrictions on foreign travel were gradually lifted – taking off by 27.5 % in August – the figures showed activity remained 75 % below pre-Covid levels.
Kevin Brown of the investment manager Scottish Friendly said the GDP figures were positive on face value but served as a reminder of the pressures bearing down on the British economy during a burgeoning cost of living crisis.
Challenges from soaring prices and shortages of materials including steel, concrete, timber and glass dragged down the construction sector, with output falling by 0.2 % in August after a 1 % drop in July.
In a sign of continuing pressure on the economy, separate figures showed severe shortages of lorry drivers and supply chain disruption weighed heavily on UK trade volumes in August.
The ONS said goods exports fell by £1.3bn, or 4.6 %, from a month earlier, and were driven by a sharp decline in shipments of cars and mechanical power generators to the EU and the rest of the world.
Paul Craig, a portfolio manager at Quilter Investors, said supply problems would no doubt weaken growth expectations for the months ahead as disruption caused by the coronavirus and Brexit dragged on the economy.
"The creaking UK economy is taking its time to spring back to life.
The problems lie now not with demand but with supply.
Acute labour shortages in several pockets of the economy along with chronic skills shortages have the potential to frustrate the economic recovery, and could well dampen any expectations for a strong economic revival over the winter months," he said.
The UK economy grew by 0.4 % in August as more people dined out, went on holiday and attended music festivals.
"The economy picked up in August as bars, restaurants and festivals benefited from the first full month without Covid-19 restrictions in England," said Darren Morgan, director of economic statistics at the ONS.
"However, later and slightly weaker data from a number of industries now mean we estimate the economy fell a little overall in July."
Emma-Lou Montgomery associate director at Fidelity International, said that while August's growth "marks a small rebound" on July, "the worry remains that economic growth won't even be in touching distance of pre-pandemic levels until well into next year".
"But with households facing steep price rises for everyday items, from the food shop through to the gas bill, there will be little desire- or capacity- to spend, spend, spend."
What's becoming increasingly clear, is that it's not a lack of demand for goods and services that's holding the recovery back but the inability of firms to supply that demand.
A big part of the reason?
But they can't meet more orders, partly because of a shortage of materials in August ( for example, wood and steel ) and partly because of a shortage of skilled staff.
The ONS reports evidence that the shortage of haulage drivers is slowing down industries from pharmaceuticals to electric lighting.
Exports of goods, too, are down by 13 % compared with 2018.
Some of these shortages may be due to supply bottlenecks related to the post-pandemic global surge in activity.
But without doubt some, notably the ongoing shortage of lorry drivers, are in large part related to Brexit.
Paul Dales, chief UK economist at Capital Economics, said : "Such drags may have become more widespread and significant in September and October, with the fuel crisis preventing some people from getting to work."
Martin Beck, economist at professional services firm, EY, said : "The recovery is certainly facing more headwinds.
"Rising inflation, driven by significant increases in energy prices, and the recent cut in Universal Credit are squeezing consumers' spending power."
Numbers published this morning by the Office for National Statistics ( ONS ) revealed that UK gross domestic product grew by 0.4 per cent in August this year- remaining 0.8 per cent lower than it was before the coronavirus crisis.
'The recent broadening in shortages and the fuel crisis may mean that growth has come to a near-standstill since August. '
Director of Policy at the British Chamber of Commerce James Martin said : 'There remain very real difficulties under the overall numbers, with labour and skill gaps, rising cost pressures and an increasingly onerous tax burden showing that the Government needs to act now to improve business conditions. '
'These recruitment difficulties are likely to dampen the recovery by limiting firms' abilities to fulfil orders and meet customer demand. '
Chris Sanderson, CEO of the hospitality recruitment app Limber, said : 'One of the biggest problems with the jobs market right now isn't the lack of positions available, but finding the people to actually fill them.
The ONS flagged the impact of the mounting recruitment crisis in the UK, with vacancies rising 318,000 above levels seen before Covid and recent analysis showing a raft of sectors struggling to fill posts.
'Job vacancies are at an all-time high, and employers that increase their 'flex appeal' are offering training to those re-careering and homeworking and flexibility options to experienced hires who increasingly demand it.
The ONS figures showed unemployment fell 126,000 in the quarter to August to 1.5 million, while employment rose 235,000 to 32.4 million.
Financial markets are now pricing in a rate rise by the end of the year, although many economists think 2022 will see the first move.
however, this prospect was now probably "implausible", said samuel tombs at pantheon macroeconomics.
the most popular toys, games consoles, smart phones, white goods to your christmas trees are predicted to be in short supply this december.
Shipping experts have warned the crisis is hitting Britain particularly hard.
Mr Wilson said there is a potential that some items may not be available nearer to Christmas, and when asked what items are most at risk of that, he said : 'It's a real mix.
He pushed the minister on whether or not he was pleased with a roughly 7 per cent success rate.
Previously, ministers had warned that companies would have to accept a large rise in CO2 rates, with a possible fivefold increase.
'However, this is yet another example of cost pressures in the supply chain, along with rising transport costs, higher energy and commodity prices, and ongoing labour shortages. '
The recovery from the pandemic has lost momentum in recent months, and statisticians now believe activity shrank slightly in July.
Output has still not recovered to reach its pre-pandemic peak and it will fall short of growth predictions laid out by the Bank of England ( BoE ).
The fresh figures come as global lender of last resort, the International Monetary Fund, underlined the risk of an inflation shock in the UK and the US in its latest health check of the global economy on Tuesday.
Interest rate rises are most often used as a tool to cool inflation generated by economic growth, rather than moderate price growth driven by supply shocks such as the recent climb in natural gas prices.
The relatively sluggish growth in July and August compared to some estimates means that the economy is still 0.8 per cent below its level before the pandemic hit in February 2020, according to the ONS.
These global issues have been exacerbated by acute labour shortages in the UK as the result of fewer EU migrants in areas such as HGV drivers.
In construction, the 0.2 per cent fall in output marked the third such fall in four months.
More recent survey data suggests that ongoing problems with sourcing materials will constrain growth well into the winter.
Domestic crises will combine with global issues to take a further toll, economists warn.
The Bank of England predicted that the UK economy would grow by 2.1 per cent in the three months to September compared to the previous quarter.
It would require a sharp uptick of growth of 2.2 per cent from August to September, which none of the faster, indicative survey data supports.
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