The UK economy grew by 0.4% in August as more people dined out, went on holiday and attended music festivals.
According to the Office for National Statistics (ONS), the services sector contributed the most to economic growth in the first full month after all Covid restrictions were lifted in England.
According to the report, arts, entertainment, and recreation grew by 9%, boosted by sports clubs, amusement parks, and festivals.
There was also an increase in the demand for hotels and campsites.
From the 19th of July, restrictions on social distancing were relaxed.
According to the ONS, the economy is now 0.8 percent smaller than it was before the pandemic.
“The economy picked up in August as bars, restaurants, and festivals benefited from the first full month in England without Covid-19 restrictions,” said Darren Morgan, the ONS’s director of economic statistics.
“However, later and slightly weaker data from a number of industries now lead us to believe the economy fell slightly in July.”
According to the ONS, economic growth fell by 0.1 percent in July, compared to initial estimates of 0.1 percent growth.
In August, activity in the accommodation and food services sector increased by 10.3 percent, with hotels and campgrounds growing by 22.9 percent.
Air travel and rail travel both increased in August as Covid-related measures eased, but both industries remain far below pre-pandemic levels.
While August’s growth “marks a small rebound” from July, “the worry remains that economic growth won’t even be in touching distance of pre-pandemic levels until well into next year,” according to Emma-Lou Montgomery, associate director at Fidelity International.
According to her, disruptions in the supply chain risk undermining consumer confidence.
“This is all happening in the crucial run-up to Christmas, when suppliers and retailers should be firing on all cylinders,” Ms Montgomery explained.
“However, with households facing steep price increases for everyday items ranging from groceries to gas, there will be little desire – or capacity – to spend, spend, spend.”
Elsewhere, economic growth has been uneven, with some sectors suffering from material shortages. Construction output fell by 0.2 percent in August, leaving the sector 1.5 percent below pre-pandemic levels.
According to the ONS, “this reflects recent challenges faced by the construction industry due to rising input prices and delays in the availability of construction products, particularly steel, concrete, timber, and glass.”
Following a 0.6 percent increase in July, the manufacturing sector expanded by 0.5 percent in August. According to the ONS, growth was led by an increase in vehicle production “as it continues to recover from supply side challenges, primarily caused by the global microchip shortage disrupting car production.”
However, it stated that output in the manufacture of motor vehicles is still 14.5 percent lower than a peak in February of this year.
“Such drags may have become more widespread and significant in September and October, with the fuel crisis preventing some people from getting to work,” said Paul Dales, chief UK economist at Capital Economics.
According to him, Capital Economics’ activity indicator “suggests that GDP may have not increased at all in September.”
“The recovery is certainly facing more headwinds,” said Martin Beck, economist at professional services firm EY.
“Rising inflation, driven by significant increases in energy prices, as well as the recent reduction in Universal Credit, are squeezing consumers’ spending power.”