The sluggish UK economy is once again lagging behind the G7 package by Reuters

By William Schomberg and Andy Bruce

LONDON (Reuters) – Britain’s economic recovery from the coronavirus pandemic lagged behind other wealthy nations in July-September, according to official data on Thursday, underscoring the Bank of England’s interest rate dilemma.

Gross domestic product grew by 1.3%, the weakest growth in three months since Britain was blocked in early 2021.

The Bank of England and Reuters economists ’survey predicted a 1.5% spread.

The Office for National Statistics said the UK economy remained 2.1% lower than at the end of 2019, a larger gap than in Germany, Italy and the Seven Group countries.

The United States has already surpassed its pre-crisis size. Canada and Japan, the rest of the G7 members, have yet to report growth data for the third quarter, but in the second quarter they already reclaimed more land than Britain had in the third quarter.

Thursday’s data showed that UK GDP grew by 0.6% in September – a stronger-than-expected forecast for Reuters polls of 0.4% – but revised lower figures from previous months.

GDP fell by 0.2% in July, down from the previously estimated 0.1% fall, while production rose by only 0.2% in August, weaker than the 0.4% initially announced.

“Although monthly production has risen since the July contraction, it is likely to reflect a temporary boost as a result of easing the cuts,” said Suren Thiru, chief economist at the UK Chamber of Commerce.

INTEREST RATES

The BoE said last week that it had halted interest rates, saying that recent economic growth was weaker than expected and that it would pay close attention to the labor market situation after the government’s employment protection scheme ended on 1 October. .

Paul Dales, a consulting economist at Capital Markets, said he expected the 0.6% growth recorded in September to disappear quickly.

“That’s one reason why the Bank of England is questioning whether it will raise interest rates to more than 0.50% next year,” he said.

Last week the BoE shocked financial markets by keeping its benchmark rate low at 0.1%, although it forecast inflation to reach almost 5%, more than doubling its 2% target.

September GDP growth was supported by stronger output in the healthcare sector, as people returned to visit doctors after the downturn in the pandemic, and since August there has been a 0.7% rise in the services sector.

But industrial production fell by 0.4% as the distribution of gas fell for the fourth consecutive month.

The world’s fifth largest economy shrank by almost 10% in 2020, more than most other rich nations.

But the International Monetary Fund predicted in October that it was on track to be the fastest spread in any G7 country when it was expected to grow by 6.8% in 2021.

However, the rapid rebound in the blockade seen in the spring led to slower growth over the summer due to the rise in COVID-19 cases, global supply chain problems and the shortage of some post-Brexit workers.

The ONS reported a drop in underlying inventories for manufacturers during the July-September period, which it said reflected some of the challenges in the final supply chain.

Separate data showed that the UK goods deficit widened from £ 9bn in the third quarter to £ 42.3bn, driven by rising imports from the EU and non-EU countries as exports fell, mainly to non-EU countries.