Top firms react to slow October GDP growth

The UK economy’s GDP figures for October revealed the slowest monthly expansion since the economy returned to growth in May. GDP only grew by 0.4% month-on-month in October, with the introduction of the tiered lockdown system in England leading to business closures across the country. During October, all output sectors expanded but growth in services output was limited to just 0.2% month-on-month as the hospitality and leisure sectors were increasingly subject to restrictions. However, manufacturing and construction output held up better during this period with both up 1.7% and 1%, respectively. The EY Item Club currently expects GDP possibly has contracted by no more than 5% month-on-month in November, compared to 19.5% in April. Howard Archer, chief economic advisor to the EY Item Club, said: “October’s slowdown in activity was most evident in the services sector where output edged up 0.2% month-on-month. The services sector was primarily held back by hospitality venues increasingly being closed as a result of COVID-19 restrictions. “Indeed, the ONS reported that activity grew in October in 11 out of 14 services sub-sectors, but output fell 14.4% in the accommodation and services sub-sector. Services output was down 8.8% year-on-year in October.” He added: “Industrial production rose 1.3% month-on-month in October, with manufacturing output climbing 1.7%. Eleven out of 13 manufacturing sub-sectors achieved growth in October, led by the manufacture of transportation equipment. “There have been indications that the manufacturing sector is benefiting from stock building and increased demand from abroad ahead of the UK-EU transition arrangement ending on 31 December. Industrial production was down 5.5% year-on-year in October with manufacturing output down 7.1%.” Dr Jonathan Gillham, PwC’s chief economist, said: “Looking forward, the economy should begin to rev up at the start of next year as the vaccine rollout progresses and confidence builds in the first half of 2021. “However, the longer term outlook will very much depend on the nature and duration of further restriction measures and the outcomes of the UK-EU trade negotiation, which could weigh on growth.” He added: “With this in mind, we expect that in 2021 GDP growth will range between 6.0% and 3.4%.”