The UK economy grew faster than previously thought in the second quarter, thanks to a stronger performance from health services and the arts than initial estimates had captured.
The Office for National Statistics said UK gross domestic product increased by 5.5 per cent in the second quarter, after being revised up from the first estimate of a 4.8 per cent increase.
This means the economy is now 3.3 per cent below its level in the fourth quarter of 2019, before the pandemic struck, up from the previous estimate of 4.4 per cent below.
The revisions lend support to the case for the Bank of England to start tightening its monetary policy early to rein in rising inflationary pressures.
Earlier this week, BoE governor Andrew Bailey said every member of the monetary policy committee was ready to raise interest rates before the end of the year if needed to prevent higher inflation from becoming persistent.
“The upward revision to GDP in the second quarter brings the UK economy’s performance in line with other G7 economies,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The gap between current UK growth levels and its pre-pandemic peak is now identical to that seen in Germany, similar to the 3.2 per cent shortfall in France, and better than the 3.8 per cent shortfall in Italy.
The new data show that “the economy grew more in the second quarter than previously estimated, with the latest data showing health services and the arts performing better than initially thought”, said Jonathan Athow, deputy national statistician for economic statistics at the ONS.
The largest contributors to this increase were from retail trade, accommodation and food services, education and health, and social work, according to the ONS.
Despite the upward revision, more timely monthly figures showed that the recovery largely stalled in July, while separate data from the BoE on Wednesday showed that consumers saved rather than spent in August.
“With real disposable income set to fall by about 1.5 per cent quarter on quarter in [the fourth quarter], in response to a withdrawal of fiscal support and the surge in energy prices, we expect households’ real spending still to be about 2 per cent below its pre-Covid peak in Q4,” said Tombs.
The revised figures also show households have been saving less in recent years than previously thought.
A strong rise in household spending in the second quarter saw the household savings ratio decrease to 11.7 per cent, compared with 18.4 per cent in the first quarter — though this was still the second-highest level since records began in 1963. Previous estimates had indicated that about 25 per cent of household income was saved in the first quarter.
“Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars,” said Athow.