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November 2020

Lower growth and higher uncertainty

2020 has been a challenging year so far. The first part of the year saw the economy shrink by almost a quarter, as the pandemic hit and restrictions were put in place. Since then, the economy has mostly been improving but has far from from recovered. Overall, monthly GDP fell to 75% of its 2019 average level in April. By September, it was back to 95% of what it was.

For a quick-read of this month’s update, see: Ahead of the Spending Review: What is the state of the economy?

Headline Indicators summary

GDP grew by 15.5% in July-September 2020 compared to the previous quarter. This compares to growth of 12.6% in the Eurozone in Q3 2020.

Services output was down by 10.0% in the three months to September 2020 compared to the previous year. Manufacturing output fell by 8.8%.

CPI inflation was 0.7% in October 2020, up from 0.5% in September. Inflation in the Eurozone was -0.3% in October, the same level as in September.

The Bank of England’s Monetary Policy Committee (MPC) left interest rates unchanged at 0.1% on 5 November, the lowest they have ever been, following a cut from 0.25% on 19 March.

Average wages excluding bonuses were 1.9% higher in the three months to September 2020 compared with the year before. CPI inflation for this period was 0.6%.

32.51 million people were in employment in July-September 2020, down 247,000 from a year before. The employment rate was 75.3%, down from 76.0% the previous year.

1.62 million people were unemployed in July-September 2020, an increase of 318,000 from the year before. The unemployment rate was 4.8%. The UK harmonised unemployment rate for Q2 2020 was the 4th lowest of the 36 OECD countries.

Productivity across the whole UK economy rose by 5.2% in Q3 2020 compared with the previous quarter. Compared with the previous year, it was up by 3.0%.

Government borrowing in April-October 2020/21 was £215 billion, £169 billion more than in the same period in 2019. At the end of October 2020, public sector net debt was equivalent to 100.8% of GDP, up from 81.8% at the end of October 2019.

The UK had a trade surplus of £8.6 billion in the three months to September 2020, compared with a £9.5 billion surplus in the previous three months. The current account deficit was £2.8 billion in Q2 2020 (0.6% of GDP), down from £20.8 billion in Q1 2020 (3.7% of GDP).

The value of sterling increased by 0.3% between September and October, following a fall of 1.2% between August and September. Compared with a year ago, it is 1.0% higher.

The volume of retail sales increased by 8.9% in the three months to October 2020 compared with the previous three months, and increased by 4.4% compared with the previous year.

House prices increased by 4.7% in the year to September 2020.

Household debt stood at 128.5% of disposable income in Q2 2020. It has been around this level since mid-2017.

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