"This has provided a better start to 2021 than anticipated at the beginning of the year and we expect it to contribute to a strong rebound in the second quarter"
The latest ONS statistics show that the service sector grew by 1.9% in March 2021, with schools re-opening across England and Wales and retail trade sales continuing to show strength.
Output in the production sector grew by 1.8% in March 2021, as manufacturing grew for a second consecutive month, at 2.1%.
In March, GDP was 5.9% below the levels seen in February 2020 and 1.1% below the initial recovery peak in October 2020.
GDP decreased by 1.5% over Q1, as school closures and a large fall in retail sales earlier in the quarter dragged down growth.
On a quarterly basis, the level of GDP is now 8.7% below where it was before the pandemic in Q4 2019.
Rory Macqueen, principal economist at NIESR, said: “A contraction of 1.5% is in line with our forecast for the first quarter of the year, underlining the extent to which the economy has adapted to deal with the latest national lockdown. This has provided a better start to 2021 than anticipated at the beginning of the year and we expect it to contribute to a strong rebound in the second quarter, as the economy opens up, consistent with our year-on-year growth forecast of 5.7% in 2021. As expected with many children returning to school, the education sector provided the largest contribution to growth in March. There were also significant contributions from the retail sector and from testing and vaccination programmes in the health and social care sector.”
Nitesh Patel, strategic economist at Yorkshire Building Society, commented: “The 2.1% month-on-month rise in GDP to March – the strongest growth since August 2020 – may well mark the start of a rapid rebound in GDP that will take the economy back to its pre-pandemic level in the first half of next year, with GDP now just 5.9% below where it stood in before the Covid-19 crisis.
“The driver of growth has been services, with the reopening of schools and retail sales picking up in March helping to boost GDP. The sharp rises in confidence, indicated by business surveys, suggests the economy had started to make progress before 12 April when lockdown eased, with bars and restaurants attracting customers in their droves to eat and drink outdoors to pubs and restaurants with gardens. With the next phase of unlocking commencing from next Monday and a full opening date set for 21 June, we expect to see the economy on an upward trajectory.
“We expect money will be burning a hole in the pocket of consumers, whose confidence has been renewed by the successful rollout of the vaccination to date and who will want to make up for lost time this summer. As always, this optimism is dependent on the roll-out of the vaccine programme continuing to progress, with a risk of further rises in infections or new variants that could slow the recovery.”
