The UK economy increased by 0.4 percent in August, as more people ate out, took holidays, and enjoyed music festivals, a report said.
According to the Office for National Statistics (ONS), the services sector contributed the most to the economy’s growth during the first full month following the lift of entire Covid limitations in England.
It noted that entertainment, arts, and recreation increased by 9 percent, helped by amusement parks, sports clubs, and festivals.
The demand was also higher for campsites and hotels.
The social distancing restriction was reduced on July 19.
However, the ONS also reported that the economy is 0.8 percent smaller than before the pandemic.
“The economy picked up in August as bars, restaurants, and festivals benefited from the first full month without Covid-19 restrictions in England,” said Darren Morgan, director of economic statistics at the ONS.
In August, food and accommodation services increased by 10.3 percent, while campsites and hotels saw 22.9 percent growth.
In the travel industry, air transportation and rail increased in August, as measures related to Covid were eased. However, both sectors are trading at levels that are far below the pre-pandemic norms.
Emma-Lou Montgomery, associate director at Fidelity International, said that although August’s increase “marks a small rebound” from July’s, “the worry remains that economic growth won’t even be in touching distance of pre-pandemic levels until well into next year.”
She also said disruptions in supply chains could affect consumer confidence.
The manufacturing industry grew by 0.5 percent in August after an increase of 0.6 percent in July. The ONS noted that growth was fueled by increased vehicle manufacturing “as it continues to recover following supply-side challenges predominantly caused by the global microchip shortage disrupting car production.”
However, it also noted that the output of motor vehicle manufacturing is 14.5 percent lower than the level reached in February of this year.
Paul Dales, the chief UK economist at Capital Economics, said: “Such drags may have become more widespread and significant in September and October, with the fuel crisis preventing some people from getting to work.”
He stated that Capital Economics’ activity indicator “suggests that GDP may not have increased at all in September.”
Martin Beck, an economist at the professional services firm EY, added that “the recovery is certainly facing more headwinds.”
“Rising inflation, driven by significant increases in energy prices, and the recent cut in Universal Credit are squeezing consumers’ spending power.”