GDP monthly estimate, UK: August 2020

Monthly gross domestic product (GDP) grew by 2.1% in August 2020 as lockdown measures continued to ease. This is the fourth consecutive monthly increase following a record fall of 19.5% in April 2020.

August 2020 GDP is now 21.7% higher than its April 2020 low. However, it remains 9.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.

Monthly gross domestic product (GDP) grew by 2.1% in August 2020 following growth of 6.4% in July, 9.1% in June and 2.7% in May. Despite this, the level of output has not fully recovered from the record falls seen across March and April 2020, and is still 9.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.

Before we continue to review how the economy performed up to August, looking ahead, results from Wave 14 of the Business Impact of Coronavirus (COVID-19) Survey (BICS), which covered the dates 7 to 20 September 2020, found that of businesses currently trading, 45% reported their turnover had decreased below what is normally expected for September.

This release features revisions to the monthly data back to January 1997, in line with the UK National Accounts revisions policy. While the revisions are small at headline level in 2019, it is worth noting that there have been comparatively larger revisions to 2020. More detail can be found in Revisions in Section 9.

Figure 2: Breakdown of GDP and its sub-sectors, month on month growth rates and contributions to growth, August 2020

Notes:

1. Growth for aggregate sub-sectors is a weighted average of components.

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Figure 2 shows the growth and contributions across different sub-sectors for August 2020. The accommodation and food services sub-sector contributed 1.25 percentage points to the 2.1% growth in GDP for August 2020, as the combined impact of easing lockdown restrictions, Eat Out to Help Out Scheme and “stay-cations” boosted consumer demand. More detail can be found in Section 4.

The monthly growth rate for GDP is volatile. It should therefore be used with caution and alongside other measures, such as the three-month growth rate, when looking for an indicator of the longer-term trend of the economy. However, it is useful in highlighting one-off changes that can be masked by three-month growth rates.

Figure 3: GDP grew by 8.0% in the three months to August, following two consecutive quarterly falls

UK GDP growth, Quarter 1 (Jan to Mar) 2005 until June to August 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sep), Q4 refers to Quarter 4 (Oct to Dec).
2. Rolling three-month estimates are calculated by comparing GDP in a three-month period with GDP in the previous three-month period. For example, GDP June to August compared with the previous March to May.

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Gross domestic product (GDP) grew by 8.0% in the three months to August 2020 as restrictions on movement eased across June, July and August.

Rolling three-month growth is based on output gross value added (GVA). There will therefore be discrepancies in the time series with our quarterly estimates of GDP, which include information on the expenditure and income approaches to measuring GDP.

Figure 4: Breakdown of GDP and its sub-sectors, rolling three month growth rates and contributions to growth, June to August 2020

Notes:

1. Rolling three-month estimates are calculated by comparing GDP in a three-month period with GDP in the previous three-month period. For example, GDP June to August compared with the previous March to May.
2. Growth for aggregate sub-sectors is a weighted average of components.
3. Components contributions may not sum to total because of rounding. Please use additional caution when aggregating individual contributions for June to August 2020, as the larger-than-usual growth rates mean that, when summed, the rounded contributions may not accurately represent the higher-level contribution being calculated.

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All the headline sectors provided a positive contribution to GDP growth in the three months to August 2020. The services sector grew by 7.1%, production by 9.3% and construction by 18.5%. Figure 4 shows the growth across different sub-sectors, with nearly all sub-sectors increasing in the three months to August, as restrictions on activity eased.

Figure 5: Output in 12 of the 14 sub-sectors of services remains below February 2020 levels, before the main impacts of the coronavirus were seen

Monthly output (March, April, May, June, July and August 2020) as a proportion of February 2020, February 2020 output = 100%

Notes:

1. Chart shows the March, April, May, June, July and August output as a proportion of February 2020 where February output equals 100%.
2. Please hover over the chart lines to display services sub-sector labels.

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In August 2020, the services sector grew by 2.4%, following growth of 5.9% in July. The accommodation and food services sub-sector was the largest contributor to the increase in August, in particular, the food and beverage service activities industry, which grew 69.7% as the combined impact of easing lockdown restrictions and the Eat Out to Help Out Scheme boosted consumer demand for bars and restaurants. For details on the UK National Accounts treatment of the Eat Out to Help Out Scheme please see Eat Out to Help Out in Section 9.

The accommodation industry also grew by 76% as international travel restrictions boosted domestic “staycations”. These industries contributed 1.25 percentage points to the 2.1% growth in GDP for August 2020.

Despite an increase of 2.4% in services, the level of services output is 9.6% lower than the level in February 2020 before the main impacts of the coronavirus (COVID-19) were seen. Of the fourteen services sub-sectors, 12 remain below their February 2020 level, with accommodation and food services output 13.7% lower.

Figure 6 shows the performance of total services output, a composite industrial indicator based on output in “consumer-facing” services and output in all other services. This shows that the consumer-facing services saw the greatest loss in output during the introduction of restrictions on movement that began on 23 March 2020.

In the most recent months, as restrictions on activity have eased, consumer-facing services has recovered in line with all other services because of consumer demand for pubs and restaurants, personal services, and retail.

Looking at the rolling three-month growth, services output grew by 7.1% in August 2020, following falls of 7.1% in July, 19.2% in June, 18.5% in May and 10.8% in April. This was driven by increases in nearly every industry, most notably:

• wholesale and retail trade and repair of motor vehicles, which recovered to above its February 2020 level, as a result of the reopening of car showrooms
• retail trade, which grew by 17.9% as a result of strong growth in non-food stores and a record proportion of online sales
• education, which grew by 16.4% as some children returned to school

Figure 7: Output in 10 out of the 13 sub-sectors of manufacturing remains below February 2020 levels, before the main impacts of the coronavirus were seen

Monthly output (March, April, May, June, July and August 2020) as a proportion of February 2020, February 2020 output = 100%

Notes:

1. Chart shows the March, April, May, June, July and August output as a proportion of February 2020 where February output equals 100%.
2. Please hover over the chart lines to display manufacturing sub-sector labels.

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Production grew by 0.3% in August 2020, with manufacturing growing by 0.7%. The manufacturing sector saw 8 out of its 13 sub-sectors increasing following large falls across March and April 2020. Despite growth in the latest month, production output is 6.0% lower than the level in February 2020, with manufacturing 8.5% lower.

Looking at the rolling three-month growth, output in the production sector grew by 9.3% in August 2020, following falls of 3.0% in July, 16.3% in June, 15.4% in May and 9.2% in April. This was driven by increases in all four sub-sectors:

• manufacturing, which grew by 11.3% as a result of 12 out of the 13 sub-sectors increasing, most notably the manufacture of transport equipment, which grew by 25.6%
• electricity, gas, steam and air conditioning supply, which increased by 5.0% as a result of increased demand as more factories and premises reopened
• mining and quarrying, which grew by 6.0% as quarrying recovered across May and June 2020 after low levels of output in March and April
• water supply, which grew by 3.6% as a result of a general increase in commercial, industrial and construction waste activity

Figure 8: Construction grew by 3.0% in August 2020 but the level of output remains 10.8% lower than February 2020, before the full impact of the pandemic

Monthly output (March, April, May, June, July and August 2020) as a proportion of February 2020, February 2020 output = 100%

Notes:

1. Chart shows the March, April, May, June, July and August output as a proportion of February 2020 where February output equals 100%.

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Month-on-month, output in construction grew by 3.0% following a record fall of 41.2% in April 2020. This is the fourth consecutive month of growth, however it is important to note that since the record monthly growth of 21.8% in June, growth in construction output has slowed. The latest increase was driven by new housing, and in particular private new housing (18.1% weight in construction), which grew by 12.8% in August 2020 after large declines in March and April.

Despite growth in the construction sector, output remains 10.8% lower than the level in February 2020 before the full impact of the coronavirus (COVID-19). The infrastructure sub-sector is the only component of construction to return to its February 2020 level where the fall in the level of output was comparatively lower, and anecdotal evidence suggests that work on larger sites can more easily adapt to social distancing measures.

On a rolling three-month basis, the construction sector grew by 18.5% in August 2020 following a record fall of 35.7% in June. The main contributor to this increase was new housing, in particular private housing, which grew by a record 34.9%.

Revisions

This release gives data for August 2020 for the first time and incorporates revisions to monthly data from January 1997 to June 2020 as published in the Quarterly National Accounts release on 30 September 2020. Data are consistent with the Quarterly National Accounts release published on 30 September 2020 and Blue Book 2020, which will be published on 30 October 2020. Table 2 shows the revisions to monthly GDP and sub-sectors for 2020.

A number of methodological changes have been made and improved source data have been used in addition to revisions caused by taking on updated source data as would happen in all quarterly national accounts releases. Further details about the main changes affecting this release are provided in the latest Quarterly national accounts release, along with analysis of the revisions to each quarter from 2019 onwards.

July 2020 is also open to revision, taking on updated survey data.

Coronavirus (COVID-19)

This release captures the direct effects of the coronavirus (COVID-19) pandemic and the government measures taken to reduce transmission of the virus. We have faced an increased number of challenges in producing monthly and quarterly estimates of UK gross domestic product (GDP). More detailed information on the challenges and the steps taken to mitigate those can be found in Coronavirus and the effects on UK GDP.

As a result of these challenges, GDP estimates for August 2020 are subject to more uncertainty than usual.

It is important to note that, while in the short run we have faced challenges to collect the information required to produce the Monthly Business Survey (MBS), response rates have improved since the first published estimate, as shown in Table 3.

Notes

1. Table shows MBS turnover response rates.
2. Response rate for all months, both questionnaire and turnover, can be found in Index of Production, Index of Services, and Construction.

Construction response rates for March 2020 are lower than usual as the MBS was collected by paper before moving online in April. For more information, please refer to the Construction release.

Eat Out to Help Out

The UK National Accounts treat the government’s Eat Out to Help Out (EOTHO) Scheme as a subsidy on products paid by central government to businesses in the private non-financial corporations (PNFCs) sector.

To ensure GDP impacts in line with this treatment, respondents to the MBS have been asked to return turnover excluding any reimbursement from the government under the scheme. These returns have been deflated using the Consumer Price Indices within the food and drink categories, which themselves have been adjusted to reflect the reduced prices paid by consumers as a result of the scheme. This results in a headline volume series that will reflect higher output related to any increase in the volume of meals consumed under the scheme.

This release is based only on the output approach to GDP. Additional steps will be taken when GDP is compiled on a quarterly basis to ensure flows are routed as subsidies across all transactions in the three approaches to GDP. Aside from any usual data revisions, this should not affect the headline estimates of GDP published in this release.

Communicating gross domestic product

Recent analysis explains our latest position on how we are looking to communicate GDP, including how we will continue to acknowledge that “technical” recessions are comprised of at least two consecutive quarters of contracting GDP.

While it is still true that these early estimates are prone to revision, we prefer to focus on the magnitude of the contraction that has taken place following the coronavirus pandemic. It is clear that the contraction in GDP in quarter 2 was in the largest recession on record. Our latest estimates show that the UK economy is now 9.2% smaller than it was in February, the effects of which have been most pronounced in those industries that are most exposed to public health restrictions and the effects of social distancing.

Quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Gross domestic product (GDP) QMI.