11 June 2021
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3 min read
The UK economy grew at its fastest monthly rate since July last year
The UK economy grew at its fastest monthly rate since July last year, having jumped 2.3% in April as lockdown restrictions continued to ease.
While the largest jump in almost a year, the latest GDP stats came in slightly below the consensus forecast of 2.4%.
In a year-on-year comparison, GDP in April grew by 27.6% compared to the same month last year.
Jonathan Sparks, CIO, UK and Channel Islands, private banking and wealth management at HSBC, said investors have grown accustomed to erratic GDP figures since the pandemic, but that today's data confirms the UK "reached a turning point in April", when the re-opening of non-essential retail and easing of hospitality restrictions boosted spending.
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"Consumer confidence has surged higher in recent months as the re-opening continues, which bodes well for more domestically focused companies," he explained.
"With cyclical companies in a strong position to capitalise on the building economic momentum, we see a lot of positives for the UK equity market, where we are tactically overweight."
Emma Mogford, manager of Premier Miton Monthly Income fund, agreed the figures show the UK is experiencing a strong recovery, and that the release of "pent-up demand" as consumers return to shops and restaurants is "significant".
"Investment by businesses is also picking up, now that there is greater certainty over the outlook post Covid and post Brexit," she said. "While the outlook is positive, the Bank of England has a challenge ahead, to continue to support the recovery, while also keeping a lid on inflation expectations."
Jesús Cabra Guisasola, associate at Validus Risk Management, said that while the UK has been one of the countries coming out in a better position from the pandemic after the success of its vaccination programme, "there are reasons to be cautious".
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"Coronavirus cases are continuing to rise, with the delta variant spreading rapidly," he reasoned. "Prime Minister Boris Johnson and his government are now facing the dilemma of moving the country to the final stage of the reopening on the 21st of June.
"Moreover, the BoE will need to decide when the best moment is to start tightening its monetary policy as some members like Andy Haldane already voted to scale back the stimulus program during the last meeting."
Hinesh Patel, portfolio manager at Quilter Investors, agreed the BoE "won't be able to sit on [its] hands if the economic recovery strengthens further", and added that much of the optimism towards the UK's economic recovery is "fairly priced into markets".
"With inflation concerns persisting, although slightly overblown in our opinion, Bailey and co may need to act sooner than they may wish," he warned.
"That said, the economy will never return to how it was before. It has gone through structural changes never seen before on this scale and as such will still need to be nursed along as it returns to sustainable growth.
"But the point will come where the spending taps will need to be switched off the economy stand on its own two feet again. When this is remains to be seen but for now the sun is shining and the roof is being fixed."
