UK economy expanded above expectations in Q3

Britain’s economy grew by record 16% in the July-September period, showing slightly faster than expected recovery from coronavirus crash.

Slightly better than expected better growth in gross domestic product – 16% vs an estimate of 15.5% – fuels optimism, but the figure is still below second quarter’s 18.8% slump, when most of the economy was shut down, as Britain’s economy was hit by pandemic harder than most others, with the second highest death toll in the Europe

Today’s data showed the economy was 8.6% below where it was a year ago, although the figure is less than initial estimate of 9.7%.

Increase in the household incomes during the summer, when many workers returned from temporary layoffs, contributed to almost 20% rise in consumer spending, while savings ratio fell to 16.9% in Q3 from the record 27.4% in Q2.

Economists expect budget deficit to hit almost 400 billion pounds in 2020/21, which is close to 20% of GDP and public debt of almost 2.1 trillion pounds of 99.5% of GDP, the highest since 1962.

The Bank of England expects GDP to shrink again in the fourth quarter, as worries about the Dec 31 end of Brexit transition period, add to the damage from new lockdowns.

UK Finance Minister Rishi Sunak pledged to tackle the huge shortfall by taking necessary steps to put public finances on a more sustainable footing, once the economy recovers.