"While there are positive indications from the Bank of England of growth returning to pre pandemic levels before Christmas, this is far from a done deal."
GDP grew by 2.1% in August 2020 following growth of 6.4% in July, 9.1% in June and 2.7% in May.
The level of output has not fully recovered from the record falls seen across March and April 2020, and is still 9.2% below the levels seen in February 2020, before the full impact of the Covid-19 pandemic.
However, August 2020 GDP is now 21.7% higher than its April 2020 low.
Tom Stevenson, investment director at Fidelity International, said: “August’s 2.1% growth was the fourth consecutive monthly rise in output, building on the V-shaped recovery since May. The pace of growth is, however, notably slower than in June and July when lockdown was eased. There is still plenty of ground to make up, with GDP 9.2% below the February level. August was boosted principally by the hospitality industry which contributed more than half of the overall improvement in activity thanks to the popular ‘Eat Out to Help Out’ scheme.
“While there are positive indications from the Bank of England of growth returning to pre pandemic levels before Christmas, this is far from a done deal. The furlough scheme comes to an end this month and there is a real danger that fear of unemployment triggers a negative feedback loop of precautionary saving and dampens consumer confidence. Covid-19 cases are rising quickly in some parts of the country, with further localised lockdowns expected to be announced on Monday. This will undoubtedly hit output as the country braces itself for a long, difficult winter.”
Richard Pearson, director at investment platform EQi, commented: “Today’s GDP figures suggest that we’re not out of the Covid-quagmire yet. The economy grew a slight 2.1%, coming in below expectations, but growth nonetheless thanks to popularity of the Eat Out To Help Out scheme. This is not quite the dramatic uptick we saw in July, but on face-value the fabled ‘V-shaped’ recovery continues.
“However, this growth is likely to be reversed in the next quarter with temporary hospitality closures sweeping across Scotland and many parts of England due to rising Covid-19 cases, naturally resulting in waves of redundancies.
“With the threat of local lockdowns looming over consumers’ heads and hospitality redundancies on the horizon, consumers aren’t going to dance the night away in the coming months. It’s likely that as we head into the next month spending will fall despite entering the busiest shopping season, and retail investors will once again return to the saving habits we witnessed during the initial lockdown.”
