The UK economy grew 2.3% in April as pubs and restaurants reopened and the vaccine drive continued at pace

COVENT GARDEN, LONDON, UNITED KINGDOM - 2021/06/07: A couple clinking beers at an outdoor area set up for drinking at the Covent Garden, London. As the UK government lifted the restrictions imposed on dining services in relation to COVID, crowds of people flooded restaurants, bars and pubs across central London over the weekend to grab a drink. Restaurants are doing their best to ensure a hygiene within their premises, and are still adopting measures to maintain a safe dining distance between tables. People are seen to be very excited about the re-opening in London. (Photo by Belinda Jiao/SOPA Images/LightRocket via Getty Images)
The English government allowed pubs and restaurants to reopen in May.

The UK economy grew 2.3% in April, figures showed on Friday, as restrictions were relaxed and pubs and restaurants in England were allowed to serve people outside.

April’s 2.3% growth in gross domestic product was the strongest since July 2020, when the economy rebounded from the first coronavirus lockdowns, although it was marginally below economists’ estimates of a 2.5% expansion.

The service sector grew a strong 3.4% in April, aided by the easing of lockdowns in the middle of the month, the Office for National Statistics said.

The pound slipped slightly after the figures were released, but was roughly flat against the dollar at $1.418.

“Strong growth in retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality all boosted the economy in April,” Jonathan Athow, deputy national statistician at the ONS, said.

Chancellor Rishi Sunak said the UK GDP figures were “a promising sign that our economy is beginning to recover.”

Despite the strong growth, UK GDP remained 3.7% smaller than in February 2020, before COVID-19 struck, according to the ONS.

Another factor boosting the UK economy has been the rapid national rollout of coronavirus vaccines. Almost 60% of Britons have had their first dose, according to Our World In Data.

The vaccine drive has so far allowed the government to stick to its timetable for reopening the economy. However, the rise in the delta variant, first discovered in India, could postpone the lifting of all restrictions, which was due on June 21.

The government lifted more restrictions in England in May, allowing people to go inside pubs and restaurants, and reopening cinemas.

“Most indicators suggest that the recovery progressed at a solid pace in May, especially after more restrictions on services businesses were lifted on May 17,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.

“For instance, the composite [purchasing managers’ index] increased in May to its highest level since records began in 1998, while data from the British Retail Consortium suggest that retail sales volumes rose a little further, despite already exceeding their 2019 average by 10% in April.”

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US GDP will exceed its pre-pandemic peak by the end of June, Atlanta Fed model says

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  • The Atlanta Fed’s GDPNow estimate sees economic growth reaching 10.4% in the second quarter.
  • Such an expansion would place US GDP above its pre-pandemic record and mark a full recovery.
  • First-quarter growth reached 6.4% as stimulus and vaccination allowed the economy to reopen.
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By at least one popular measure, the US economy will fully recover and exceed its pre-pandemic strength in the second quarter.

US gross domestic product is expected to grow at an annualized rate of 10.4% through the quarter that ends in June, according to the Federal Reserve Bank of Atlanta’s GDPNow model. Growth at that pace would place economic output at a new record high, surpassing the peak seen during the fourth quarter of 2019. It would also be the second-strongest rate of growth since 1978, exceeded only by the record-breaking expansion seen through the third quarter of 2020.

The central bank’s nowcast is a type of projection that is updated as new economic data is published. GDPNow isn’t an official forecast from the Atlanta Fed, and is instead used to narrow down where quarterly growth is likely to land. The model also ignores the pandemic’s impact beyond its influence on source data such as retail sales and global trade, according to the Fed.

The first GDPNow reading for the second quarter was published on Friday, just one day after the Commerce Department published its initial estimate of first-quarter growth. US GDP expanded at an annualized rate of 6.4% in the first three months of the year, missing the median estimate of 6.7% but still showing a sharp acceleration from the prior period. The jump was primarily fueled by widespread vaccination, gradual reopening, and stimulus passed by former President Donald Trump and President Joe Biden.

To be sure, the last quarter’s expansion came in softer than the Atlanta Fed’s final first-quarter estimate of 7.9%.

Though some individual indicators have already surpassed their pre-pandemic levels and signal a strong recovery, GDP remains just below its previous peak. Following the first-quarter reading, GDP has retraced about 96% of its pandemic-era decline. With data tracking consumer spending and hiring trending higher as the economy reopens further, the US is largely expected to complete its GDP recovery in the next two months.

Economists outside the Fed also see growth accelerating through the current quarter. The consensus estimate from a survey of forecasters calls for annualized growth of just under 9% in the second quarter. The most bullish estimates see GDP expanding at a rate of more than 11%, while the least optimistic expect growth to land at about 6%.

The estimates underscore the fact that, should vaccination continue and case counts decline further, the US is on track for its strongest rate of annual growth in decades. The International Monetary Fund estimates GDP will grow 6.4% through all of 2021, exceeding global growth of about 6% and marking the fastest rate of expansion since the early 1980s. Separately, Federal Reserve officials hold a median estimate of 6.5% growth this year.

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Bank of America lifts its forecast for US economic growth on hopes for sweeping Biden-backed stimulus

Joe Biden
President-elect Joe Biden speaks about the US economy following a briefing with economic advisors in Wilmington, Delaware, on November 16, 2020.

  • Bank of America lifted its forecasts for US full-year and first-quarter economic growth, citing hopes for new stimulus under the Biden administration and strong consumer spending trends.
  • The bank’s economists lifted their first-quarter GDP forecast to 4% growth from 1% and boosted their 2021 estimate to 5% from 4.6% expansion.
  • Early indicators suggest the $900 billion relief package signed by President Trump last month is already lifting spending activity, the team said in a note to clients.
  • The $1.9 trillion relief plan revealed by Biden on Thursday can further accelerate a return to pre-pandemic economic strength, they added.
  • Visit Business Insider’s homepage for more stories.

Robust consumer spending and the likelihood of additional stimulus led Bank of America to boost its outlook for US economic growth on Friday.

Economists led by Michelle Meyer expect US gross domestic product to grow 5% through 2021, up from the previous estimate of 4.6%. The bank’s first-quarter GDP forecast was also revised higher, to 4% from 1%.

Early indicators suggest the $900 billion relief package passed by President Trump late last month is already lifting economic activity from its nearly frozen state, the economists said. Debit- and credit-card spending is up nearly 10% from the year-ago period as of January 9, compared to being up just 2% before new stimulus was rolled out.

Additional stimulus from a Biden administration adds to the bank’s bullish forecast. The President-elect revealed a $1.9 trillion relief plan on Thursday, pitching $1,400 direct payments, state and local government aid, and a $15 minimum wage as critical to reviving the virus-slammed economy.

Democrats’ new, albeit slim, majority in the Senate signals a version of the plan will reach Biden’s desk. That extra support stands to provide a major backstop for the economy through the new year, Bank of America said.

Read more: ‘I don’t believe that we’ve really left the recession yet’: Bond king Jeff Gundlach lays out the 2 risks that investors should watch nearly a year into the pandemic – and shares the 4 components of a balanced, winning portfolio

“There are risks in both directions, but we see them skewed to the upside,” the team said in a note to clients. “There is now a ‘fiscal put’ akin to the ‘Fed put.'”

Fresh fiscal relief also takes some pressure off of the Federal Reserve in the near-term, the economists added. Should new stimulus fuel stronger growth and inflation, the Fed could rein in its easy monetary policy stance sooner than initially expected. 

The Biden-backed stimulus also provides the fiscal support Fed policymakers clamored for throughout 2020. If the economy weakens further, the government can coordinate a fiscal- and monetary-policy response akin to that seen at the start of the pandemic, the team said.

Still, elevated COVID-19 cases and strict economic restrictions will delay a full recovery, they added. Bank of America expects GDP will return to pre-pandemic levels in the third quarter.

While front-loaded stimulus boosted the firm’s first-quarter forecast, the early passage of a relief deal cut its second-quarter growth estimate to 5% from 7%.

Read more: Global X’s lithium and battery ETF returned 126% in 2020 as electric vehicle-driven demand surged. One of the firm’s analysts shared 4 stocks he sees ‘leading the rise’ in the industry going forward.

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