GDP monthly estimate, UK: September 2020

Monthly gross domestic product (GDP) grew by 1.1% in September 2020 as lockdown measures continued to ease. This is the fifth consecutive monthly increase following a record fall of 19.5% in April 2020.

September 2020 GDP is now 22.9% higher than its April 2020 low. However, it remains 8.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic. There has also been a loss in momentum through Quarter 3 (July to Sept) 2020.

Gross domestic product (GDP) grew by 15.5% in Quarter 3 (July to Sept) 2020 as restrictions on movement eased across June, July, August and September.

Quarterly growth captures the average level of output in July to September relative to the average in April to June. For more details on quarterly GDP, please see GDP first quarterly estimate, UK: July to September 2020 published today (12 November 2020).

The services sector grew by 1.0%, production by 0.5% and construction by 2.9% in September 2020, however, it is important to note that since the peak monthly growth in June, growth in GDP and its main sectors has slowed.

Looking ahead, results from Wave 16 of the Business Impact of Coronavirus (COVID-19) Survey (BICS), which covered the dates 5 to 18 October 2020, found that of businesses currently trading, 45% reported their turnover had decreased below what is normally expected for October, compared with 48% reporting decreases in September in Wave 15.

In October, there were three industries where more than 50% of businesses experienced a decrease in turnover, compared with 45% across all industries. These were the accommodation and food service activities industry, at 72%; the arts, entertainment and recreation industry, at 69%; and the education industry (private sector and higher education businesses only), at 57%.

Monthly gross domestic product (GDP) grew by 1.1% in September 2020. The level of output has, though, not fully recovered from the record falls seen across March and April 2020 and is still 8.2% 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 September 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 construction sector fell 44.4% between February and April. But, the “recovery” growth rate is then calculated from a much smaller base as the construction sector is smaller in April than it was in February; despite growing by 66.8% since April the sector remains 7.3% smaller when compared with February.

This release features revisions to the monthly data back to July 2020 in line with the UK National Accounts revisions policy. Monthly GDP in July is now estimated to have increased by 6.3%, a downward revision of 0.1 percentage points. Monthly GDP for August is now estimated to have increased by 2.2%, an upward revision of 0.1 percentage points.

Figure 4: Breakdown of GDP and its sub-sectors, monthly contributions to growth, July to September 2020

UK, Month-on-month contributions

Notes:

1. Components contribution may not sum to total because of rounding.

Download the data

.xlsx

Figure 4 shows the contributions to growth across different sub-sectors for July to September 2020. Looking at the recent months in detail, GDP grew by 6.3% in July 2020 where:

• accommodation and food service activities contributed 1.09 percentage points driven by food services as restrictions on activities eased and there was increased use of accommodation such as campsites, cottages and caravan parks

• construction contributed 0.99 percentage points as housebuilding activity increased

• wholesale and retail trade and repair of motor vehicles contributed 0.89 percentage points as many car showrooms reopened to the public as well as pent-up demand following lengthy closures

Monthly GDP in August increased 2.2%, driven by accommodation and food service activities, which contributed 1.18 percentage points. This was 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, and the accommodation industry also increased as international travel restrictions boosted domestic “staycations”.

Monthly GDP in September increased 1.1%, where professional, scientific and technical activities had the largest contribution, as legal activities, accounting and advertising saw strong growth after a muted August. Education also had a large positive contribution in September as many children returned to school. The recent blog measuring education output in the summer of the pandemic explains our approach in estimating education output.

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

UK, monthly index, February 2020 to September 2020, February 2020 = 100

Notes:

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

Download the data

.xlsx

The services sector grew by 1.0% in September 2020, following growth of 2.4% in August. The professional, scientific and technical activities sub-sector was the largest contributor to the increase in services in September, growing by 3.9%. Within this, legal activities, accounting and advertising saw strong growth after a muted August. Education also had a large positive contribution in September as schools made further advances in returning to a pre-pandemic level of teaching, primarily through increased attendance.

Despite an increase of 1.0% in services, the level of services output is 8.8% lower than the level in February 2020 before the main impacts of the coronavirus were seen. Of the 14 services sub-sectors, 12 remain below their February 2020 level.

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 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. In the most recent months, as restrictions on activity have eased, consumer-facing services have recovered more than all the other services sector industries because of consumer demand for pubs and restaurants (boosted by the Eat Out to Help Out scheme), personal services and retail.

Looking at quarterly growth, services output grew by 14.2% in Quarter 3 (July to Sept) 2020, following a record 19.2% fall in Quarter 2 (Apr to June). This was driven by increases in nearly every industry, most notably:

• wholesale and retail trade and repair of motor vehicles, which despite falling 62.4% in Quarter 2 has recovered to above its February 2020 level, as a result of the reopening of car showrooms to the public as well as pent-up demand following lengthy closures

• retail trade, which grew by 18.4% as a result of strong growth in non-food stores and a record proportion of online sales

• education, which grew by 25.3% as schools made further advances in returning to a pre-pandemic level of teaching, primarily through increased attendance

Figure 7: Output in 11 out of the 13 sub-sectors of manufacturing remains below February 2020 levels, before the main impacts of the pandemic were seen

UK, Monthly index, February 2020 to September 2020, February 2020 = 100

Notes:

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

Download the data

.xlsx

Production grew by 0.5% in September 2020, with manufacturing growing by 0.2%. The manufacturing sector saw 10 out of its 13 sub-sectors increasing following large falls across March and April 2020, however, the manufacture of pharmaceuticals acted as a drag on growth in September, falling by 9.8%. The monthly fall was mainly because of the cumulative impact of weakness from large businesses and highlights the volatile nature of growth in this industry.

Elsewhere in production:

• mining and quarrying increased by 1.3% after declines in August because of planned maintenance shutdowns
• electricity, gas, steam and air conditioning supply recovered 2.7% above its February 2020 level
• water supply recovered 2.4% above its February 2020 level

Despite growth in the latest month, production output is 5.6% lower than the level in February 2020, with manufacturing 8.1% lower.

Looking at quarterly growth, output in the production sector grew by 14.3% in Quarter 3 (July to Sept) 2020. This was driven by increases in all the four sub-sectors:

• manufacturing, which grew by 18.7% as a result of 12 out of the 13 sub-sectors increasing, most notably the manufacture of transport equipment, which grew by 51.8%, however, it is still 22.3% below its pre-pandemic level
• electricity, gas, steam and air conditioning supply, which increased by 8.1% as a result of increased demand as more factories and premises reopened
• mining and quarrying, which grew by 1.3% as quarrying recovered across May and June 2020 after low levels of output in March and April
• water supply, which grew by 4.8% as a result of a general increase in commercial, industrial and construction waste activity

Figure 8: Construction grew by 2.9% in September 2020 but the level of output remains 7.3% lower than February 2020, before the full impact of the pandemic

UK, monthly index, February 2020 to September 2020, February 2020 = 100

Notes:

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

Download the data

.xlsx

Month-on-month, output in construction grew by 2.9% following a record fall of 41.2% in April 2020. This is the fifth consecutive month of growth, however, it is important to note that since the record monthly growth of 21.8% in June 2020, growth in construction output has slowed. The latest increase was driven by new housing, and in particular private new housing (23.1% weight in construction), which grew by 4.2% in September 2020 after large declines in March and April.

Despite growth in the construction sector, output remains 7.3% lower than the level in February 2020 before the full impact of the coronavirus. The infrastructure and private new housing sub-sectors are the only components of construction to return to their peak since February 2020. For infrastructure, the fall in the level of output was comparatively lower, and anecdotal evidence suggests that work on larger civil engineering sites can more easily adapt to social distancing measures. For housebuilders, anecdotal evidence suggests firms have managed to continue to work at sufficient capacity, particularly on sites currently in progress when the first lockdown hit.

On a quarterly basis, the construction sector grew by 41.7% in Quarter 3 (July to Sept) 2020 following a record fall of 35.7% in Quarter 2 (Apr to June) 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

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 September 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 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.

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 Monthly Business Survey have been asked to return turnover excluding any reimbursement from 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, which 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 have been taken for GDP 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 (Apr to June) was in the largest recession on record. Our latest estimates show that the UK economy is now 8.2% 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.