You would be forgiven for overlooking the release of October UK GDP growth figures yesterday. At just 0.4percent monthly growth, this wasn’t enough to make a dent in the Brexit and Covid-19 related headlines. The media is swirling with ‘will they, wont they’ stories as we continue to wait for any signs that there will be a deal agreed between the UK and the EU. So, while we wait, why not take a quick look at slowing growth.
Q3 GDP growth was a sensation that took the economy out of recession, but we warned that it was not sustainable give the boost had come from a reopening of the economy and release of pent up demand. Come October with local and regional restrictions in place, the expected slowing shows itself in the data. That being said, October marks the sixth consecutive month of growth, but GDP remains 7.9percent below February 2020, before the full impact of the coronavirus pandemic.
Contributions to growth
The services sector took a hit in growth terms this month, with production output being the main growth driver at 1.3percent for the month. All areas of the production economy saw growth, but manufacturing saw more than any other with 1.7percent monthly growth. Although this is somewhat marginal growth, it does now put manufacturing output just 4.4percent below where it was pre-pandemic.
Manufacturers and the production sector have evolved new ways of working with the COVID-19 restrictions to help ensure some functionality and indeed some growth in recent months. This is great for many areas, except for those, like civil aerospace, which are suffering a lack of demand that will ultimately impede a return to pre-pandemic growth.
Transport equipment led the Manufacturing growth for October at 5.4percent, albeit from a low base. Transport equipment remains 19.7percent behind October 2019 an example of the sectors who suffered most since February 2020 which saw the most growth this month.
Automotive grew 6.7percent between October and September 2020 but remained 15.7percent below February 2020 and Aerospace grew 5.1percent in the month but remained 22.5percent below February 2020 levels, as demand for both auto and aero have a long way to claw back.
Aerospace output – manufacturing gains but services struggles
Manufacturing for aerospace did see positive monthly growth in October 2020, but the combined sector, including service and repair, actually shrank by 0.3percent over the month. Repair and services for aerospace declined by 6.4percent between September and October 2020, and this side of the sector is now 36.3 percent below February 2020 levels.
The combined sector figures are a reminder of the widespread impacts of the COVID-19 pandemic on UK aviation. Since we are now seeing growth in some areas it is worth remembering where we are not and that the ongoing travel restrictions and reduced air passenger travel will have a long-term damaging impact on the sector.
As always, we look to quarterly data to make any more serious estimates about the future recovery for our major industries and the UK economy, but the national restrictions that came into force in November will no doubt wipe out what little growth we did see for the UK Economy this month.