In positive news for the UK economy on Thursday, it was announced by the ONS that UK GDP grew 4.8% in Q2 this year. This was under forecasts of 5%, but still represents a strong quarter as further lockdown restrictions eased.
UK economy continues to bounce back
Q2 was always going to be a key quarter for the UK economy as more lockdown restrictions were lifted and the public was able to do more and spend their money in other places.
The result was GDP growth in Q2 came in at 4.8%. It had been forecast at 5%, but that slight miss carries little significance in the bigger picture as the UK continues to bounce back from the pandemic lows faster than the rest of the G7 nations.
The UK economy is now 4.4% below the pre-pandemic level. If the country can continue this rapid bounce back, the UK should be back above pre-pandemic levels at the end of the year, barring any further economic shocks.
In comparison to other nations, the UK is leading the pace of recovery among the G7. A successful vaccination programme has allowed the UK to peel back restrictions and open up the economy faster. The EU had well-known problems at the start of their vaccination programme, and the US also began slowly under Donald Trump and only really got going once Joe Biden became President. As is it, the UK got a head start on most other countries and is now one of the leading nations in terms of economic recovery.
Inflation is key risk
Whilst the pace of the economic recovery has been welcome, the byproduct of that has been rapidly rising inflation. The Bank of England estimates that UK inflation could rise to 4% by the end of the year. To be honest that still feels like it is underdone and could be higher by the end of 2021.
Inflation is something we have to keep a very close eye on. When inflation rises faster than wages it takes real money out of people’s pockets. That disposable income is what UK fenestration and indeed the entire economy needs to keep feeding the recovery. Our sector knows all too well the price pressures that have been with us for the best part of a year.
Prices in the fenestration sector have been on a constant rise since the end of the lockdown in May 2020 with demand far higher than most anticipated. This has seen the manufacturing supply chain struggle to keep up with demand and there are now well-reported delays in glass, hardware, foils and profile in some cases.
Lead times have also stretched out to months, rather than weeks for installers. In pre-pandemic times installers would be on a rough 4-8 week lead time. Now, installer lead times are being measures in months, with many now fully booked to Christmas.
The higher and faster inflation rises, the more pressure the BoE will be put under to do something about it. The key measure they can take is to raise interest rates to cool the market and try to cap off inflation. There will be a lot of hesitancy to do that given the size of the UK national debt and the extra costs this would place on people’s tracker mortgages and personal loans.
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