FTSE dips despite UK’s 5.5% GDP jump
Strong mining performance helps to limit FTSE 100 losses.
The FTSE 100 & 250 both traded down towards Thursday’s close, despite better-than-expected data on the state of the United Kingdom’s economy.
According to the Office for National Statistics, the UK’s gross domestic product rose by 5.5% in the second quarter of 2021, an upwards revision from its initial estimate of 4.8%.
The rapid recovery seen in the three-month period occurred after the easing of Covid-19 restrictions, which allowed shops and bars to open more fully.
Jonathan Athow, the ONS’s deputy national statistician stated: “The economy grew more in the second quarter than previously estimated, with the latest data showing health services and the arts performing better than initially thought.”
Savings fall and spending increases
He added: “The revised figures also show households have been saving less in recent years than previously thought. Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars.”
The UK’s savings ratio fell from 18.4% in the first quarter to 11.7% in the second, while household spending increased by 7.9%.
UK GDP now stands 3.3% below its pre-Covid levels, which is the same rate of recovery as Germany, better than the 3.8% deficit seen by Italy and 0.1% worse than France’s bounce back.
The ONS also revised its assessment of the GDP plunge that followed in the wake of the Covid-19 crisis and subsequent lockdown. The statistics body stated that the UK’s GDP fell by 9.7% in 2020, instead of the 9.8% previously estimated. Consequently, the recession no longer constitutes the largest annual contraction in 300 years as previously thought.
Before the end of Thursday trading, The FTSE 100 and 250 traded down by 0.29% and 0.21%, respectively. The muted market sentiment can be attributed to the fact that, despite positive second-quarter figures, the recovery has slowed somewhat in recent months – in fact, economic growth fell by 1.3% to only 0.1% between June and July.
British American Tobacco and International Consolidated Airlines suffered the FTSE 100’s largest declines, falling by 4.4% and 4.1%, respectively. Miners dominated the top risers, with Anglo American, Fresnillo and Rio Tinto all trading up by 2%.
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