The UK economy appears to have pulled ahead of Germany’s in its recovery from the Covid-19 pandemic, with updated figures suggesting gross domestic product rose more quickly than thought.
(Bloomberg) — The UK economy appears to have pulled ahead of Germany’s in its recovery from the Covid-19 pandemic, with updated figures suggesting gross domestic product rose more quickly than thought.
GDP jumped 8.7% in 2021 as the economy bounced back from lockdowns, instead of the 7.6% previously estimated, the Office for National Statistics said Friday. The slump in 2020 was also shallower than the ONS had estimated, with output falling 10.4% rather than 11%.
The heavily revised figures mean GDP surpassed its pre-Covid levels on a quarterly basis at the end of 2021. Previous data showed the UK had yet to reach the milestone, making it an international outlier. Now the figures imply the UK was a notch above Germany at the bottom of the Group of Seven nations.
The revisions for the UK stop in the fourth quarter of 2021, leaving comparisons after that point based the ONS’s current estimates of GDP that may well be revised in the future.
The news will be welcomed by Prime Minister Rishi Sunak’s government, which is trying to convince voters they can trust the Conservatives with the economy. The Tories are trailing far behind the Labour opposition in opinion polls ahead of a national election expected next year.
“The fact that the UK recovered from the pandemic much faster than thought shows that once again those determined to talk down the British economy have been proved wrong,” Chancellor of the Exchequer Jeremy Hunt said in a statement. “There are many battles still to win, most of all against inflation. We can look forward to healthy growth which according to the IMF will be faster than Germany, France, and Italy in the long term.”
Output was 0.6% higher in the fourth quarter of 2021 than in the final three months of 2019, compared with previous estimates of being 1.2% lower. At that point, only the US and Canada were ahead of the UK.
“These revisions are mainly because we have richer data from our annual surveys and administrative data,” the ONS said in statement. “We are now able to measure costs incurred by businesses (intermediate consumption) directly and we can adjust for prices (deflation) at a far more detailed level.”
Assuming no change to growth rates since then, it implies the economy was 1.5% above pre-pandemic levels in the second quarter of this year, instead of 0.2% below. It would leave Germany, rather than the UK, as the worst performer in the Group of Seven.
Forecasters have been forced to revise up their projections for Britain this year too after a more resilient showing.
However, there are now signs the economy is losing momentum as rising borrowing costs add to the strain on consumers. The Bank of England is expecting a prolonged period of stagnation, while Bloomberg Economics sees a yearlong recession starting at the end of 2023.
(Updates with comment from Hunt.)
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