British GDP Grows 2% in August – Trustnodes

The United Kingdom is still seeing decent growth, with its GDP increasing year on year by 2%. The Office for National Statistics (ONS) said:

“Monthly GDP grew by 2.0% between August 2021 and August 2022, down from 3.1% between July 2021 and July 2022 (revised up from 2.3% in our previous publication).”

Month on month growth slowed down in  August to -0.3% from July, mainly due to production falling 1.6% because of significant maintenance in the North Sea oil and gas production.

These one off factors tend to make month on month data very volatile, in additional to seasonal factors.

Grant Fitzner, Chief Economist and Director, Macroeconomic Statistics and Analysis at ONS, says:

“The standard advice given when looking at monthly statistics is to not focus too much on the short-term changes – which are often volatile – but rather on the longer-term trends such as the 12-month growth rate.”

The technical definition of a recession therefore has been two quarters of contraction year on year, but the unusual economy of 2020 made it challenging to meaningfully measure growth year on year due to the base effect.

That is, if in Q2 2020 the economy contracted 22.6%, which it did for UK, the 24.3% growth in Q2 2021 is actually more a 1% growth.

The advice thus was to look at month on month data to get a better indication of trends, but back in May 2021 Fitzner said “these distortions will wash out of the annual figures in a few months’ time.”

It has now been nearly 18 months since then, with the year on year figures measuring over 2021, thus clearing distortions.

Confusion continues in the media however which reported the economy contracted in August and is on the verge of a technical recession.

Contracted over July, maybe just because July was a bit more sunny, or in this case North Sea production needed maintenance.

The economy however has not quite contracted in the proper sense of that word. As an example, China’s Q2 year on year came at 0.4%. That’s on the verge of a technical and actual recession, not month on month volatility.

The UK economy instead seems on course for growth in Q3 as well of maybe as much as 3%, year on year.

That would be down from Q2’s 4.4%, or Q1’s 10%, but obviously those figures are not sustainable.

The question is instead whether the huge boom, following the massive 2020 contraction, will now start stabilizing at a rate of good growth which the current Prime Minister has set as 2.5%.

That remains to be seen, but the pound has gained 1% on the release of these figures, increasing the gap between corporate media reporting and market movements.

That may be in part because US’s Q2 came at just 1.8% year on year, showing far better growth in Europe but UK contracted quite a bit more in 2020, and only now is around the same levels as February 2020.

The ONS index, which tries to measure current growth over 2019, has February 2020 at 100.2, with 100 being 2019 growth, August 2022 at 100.1 and May at 101.

That’s monthly data however, making it volatile, but the overall GDP is estimated to be bigger than last year by the World Bank, edging at $3.2 trillion, an all time high.

And although it isn’t growing as fast as it was, which was unsustainable, it is still growing year on year with Europe overall also thought to be seeing growth in Q3, while US and Germany may have seen a significant slowdown.