GDP monthly estimate, UK: October 2020

With a backdrop of further national measures being introduced in response to the coronavirus pandemic, monthly GDP grew by 0.4% in October 2020. This is the sixth consecutive monthly increase following a record fall of 19.5% in April 2020.

October 2020 GDP is now 23.4% higher than its April 2020 low. However, it remains 7.9% below the levels seen in February 2020, before the full impact of the coronavirus pandemic.

The services sector grew by 0.2%, production by 1.3% and construction by 1.0% in October 2020.

Looking ahead, results from Wave 18 of the Business Impact of Coronavirus (COVID-19) Survey (BICS), which covered the dates 2 to 15 November 2020, found that of businesses currently trading, 47% reported their turnover had decreased below what is normally expected for November, compared with 50% reporting decreases at the end of October in Wave 17. In Wave 18 (2 to 15 November 2020), the percentage of businesses temporarily closed or paused trading has risen to levels last seen in Wave 8 (15 June to 28 June 2020).

Monthly gross domestic product (GDP) grew by 0.4% in October 2020. The level of output has, though, not fully recovered from the record falls seen across March and April 2020 and is still 7.9% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.

The “initial fall” captures the change in level from February to April 2020, while the “recovery” captures the change in level from April to October 2020. However, it is important to note that a recovery growth rate greater or equal to the initial fall does not necessarily mean that all the lost ground has been recovered.

For example, the manufacturing sector fell by 29.6% between February and April. But, the recovery growth rate is then calculated from a much smaller base as the manufacturing sector was smaller in April than it was in February; despite growing by 32.8% since April, the sector remains 6.6% smaller when compared with February.

Monthly GDP in October 2020 increased by 0.4%, where manufacturing had the largest contribution, as manufacturing of transport equipment saw increased demand. Health also had a large positive contribution in October as there was an increase in the volume of activity. Accommodation and food service activities acted as a large drag on growth in October as tightening coronavirus measures had an adverse impact on trade and a subsequent lack of demand.

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 4: 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 index, February 2020 to October 2020, February 2020 = 100

Notes:

1. Chart shows the monthly output from March to October as a proportion of February 2020 where February output equals 100.

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In October 2020, the services sector grew by 0.2%, following growth of 1.0% in September. The services sector saw growth in 11 out of the 14 sub-sectors, however the accommodation and food service activities sub-sector acted as a drag on growth in October, falling by 14.4% as tightening coronavirus (COVID-19) measures had an adverse impact on activity and a subsequent lack of demand.

Figure 5 shows the performance of total services output, a composite industrial indicator based on output in “consumer-facing” services, and output in all other industries in the services sector. This shows that the consumer-facing services saw the greatest loss in output during the introduction of restrictions on movement, which began on 23 March 2020.

Following the easing of lockdown restrictions, consumer-facing services initially recovered more than all the other service sector industries as a result of consumer demand for pubs and restaurants (boosted by the Eat Out to Help Out scheme), personal services, and retail. However, in October 2020, consumer-facing services fell back slightly as restrictions were reintroduced, having the greatest impact on pubs and restaurants.

Looking at rolling three-month growth, services output grew by 9.7% in October 2020. This was driven by increases in nearly every industry, most notably:

• food and beverage service activities, which contributed 1.22 percentage points because of the combined impact of easing lockdown restrictions and the Eat Out to Help Out Scheme, which boosted consumer demand for bars and restaurants, in particular in August 2020
• education, which contributed 1.02 percentage points as schools made further advances in returning to a pre-lockdown level of teaching, primarily through increased attendance
• wholesale and retail trade and repair of motor vehicles, which contributed 0.68 percentage points as a result of the reopening of car showrooms to the public as well as pent up demand following lengthy closures

Figure 6: Output in 9 out of the 13 sub-sectors of manufacturing remains below February 2020 levels, before the main impacts of the coronavirus were seen

Monthly index, February 2020 to October 2020, February 2020 = 100

Notes:

1. Chart shows the monthly output from March to October as a proportion of February 2020 where February output equals 100.

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Production grew by 1.3% in October 2020, with manufacturing growing by 1.7%. The manufacturing sector saw 11 out of its 13 sub-sectors increasing following large falls across March and April 2020. The largest contribution was from the manufacture of transport equipment, which grew by 5.4% in October 2020. This is a result of growth from large businesses to meet increased demand, however, it is still 18.2% below its February 2020 level.

Despite growth in the latest month, production output is 4.4% lower than the level in February 2020, with manufacturing 6.6% lower.

Looking at rolling three-month growth, output in the production sector grew by 7.6% in October 2020. This was driven by increases in three out of four sub-sectors:

• manufacturing, which grew by 10.0% as a result of 12 out of the 13 sub-sectors increasing; most notably, the manufacture of transport equipment grew by 30.5%, however, it is still 21.4% below its pre-pandemic level
• electricity, gas, steam and air conditioning supply, which increased by 5.3% as a result of increased demand as more factories and premises reopened
• water supply, which grew by 3.0% as a result of a general increase in commercial, industrial and construction waste activity

Mining and quarrying fell by 2.3% in the three months to October 2020 as a result of declines in August because of planned maintenance shutdowns.

Output in construction grew by 1.0% compared with the previous month following a record fall of 41.2% in April 2020. This is the sixth consecutive month of growth; it is important to note that since the record monthly growth of 21.8% in June, growth in construction output has slowed.

All components of repair and maintenance saw positive growth in October 2020 where some components of new work fell. The latest increase was driven by public other new work and non-housing repair and maintenance, which grew 7.5% and 5.1% respectively. Private new housing acted as a drag on growth in October, falling by 1.9%.

On a rolling three-month basis, the construction sector grew by 24.9% in October 2020. The main contributor to this increase was new housing, in particular private new housing, which recovered after record low output in April 2020.

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 October 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 2.

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 survey was collected by paper before moving online in April. For more information, please refer to the Construction release.

End of EU Exit Transition period

After the transition period ends on 31 December 2020, the UK statistical system will continue to collect and produce our wide range of economic and social statistics. We are committed to continued alignment with international statistical standards, enabling comparability both over time and internationally and we will work with users of statistics to make sure they have the data they need to support the decisions they have to make.

Additionally, the Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes GDP) statistics to remain in line with those of other EU countries until EU budget contributions are finalised for the years in which we were a member, and making budget contributions during the transition period. To ensure this comparability during this period, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards until at least 2024.

As the shape of the UK’s future statistical relationship with the EU becomes clearer over the coming period, the ONS is making preparations to assume responsibilities that as part of our membership of the EU, and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

In applying international statistical standards and best practice to UK economic statistics, we will draw on the technical advice of experts in the UK and internationally, and our work will be underpinned by the UK’s well-established and robust framework for independent official statistics, set out in the Statistics and Registration Service Act 2007. Further information on our proposals will be made available in early 2021.

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 as a result of the coronavirus pandemic.

It is clear that the contraction in GDP in Quarter 2 (Apr to June) 2020 was the largest recession on record. Our latest estimates show that the UK economy is now 7.9% 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.