William John Market Report 13-08-21
William John Market Report 13-08-21Category: Reports
On 12/08, the Office for National Statistics released their second quarter (Q2) estimate for U.K. Gross Domestic Product (GDP) from April through June 2021. GDP is the total monetary value of all finished goods and services produced domestically by a country for a specific time period. As a broad measure of a country’s economic health, it can be measured looking at total spending, total incomes or total output, since all three are linked to each other, giving rise to the classic economic identity: income = spending = output.
There was an estimated 4.8% increase in GDP during Q2 following the easing of COVID-19 restrictions across the U.K with 4.1% of this coming from an increase in household consumption – boosted by record levels of savings during lockdowns throughout 2020 and early 2021. The main sectors experiencing domestic product growth include: services (education, accommodation and food service activities), production and construction (both wholesale and retail).
Despite a strong rise in Q2, current GDP is still 4.4% below where it was pre COVID-19 for Q4 2019. However, given the country saw a 19% drop in GDP between Q1 2020 and Q2 2020, the Treasury and the Bank of England will be relieved to see the economy rapidly bounce back to almost a full recovery within a year:
Source: William John Analytics, Office for National Statistics
Many economists have argued that the slowing down of the GDP trajectory has been due to the rapid spread of the Delta variant which delayed full economic re-opening coming into action. However, with current COVID-19 statistics indicating the success of the Government’s vaccination programme, it is forecasted that GDP will return to its pre-pandemic levels by the autumn.
Relative to its European and American counterparts though, economic progress has been slightly lethargic. The U.S. had a 6.5% increase in its GDP for Q2, reinstating GDP back to approximately its pre-pandemic level, whilst Eurozone output stands just 3% below the pre-pandemic peak, according to the Financial Times.
In summary, equity indices are likely to remain at their record highs, capitalising on accommodative monetary policy and rapidly adjusting open economies. What remains to be seen is whether the rapid recovery and growth is due to large, accumulated savings or is sustainable organic growth. If it is the former, it is likely growth will slow down into the autumn, if it is the latter, are Western economies going to enter a “post-pandemic” boom? All these questions will come clear by autumn.
Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.