The boom in domestic holidays fuelled a rebound in Britain’s economy in August as bars, restaurants and festivals benefited from the easing of most remaining Covid restrictions during the height of summer.

The Office for National Statistics (ONS) said gross domestic product rose by 0.4% in August compared with the previous month as consumers increased their spending on leisure during the first full month without domestic government restrictions in England.

However, the ONS cut its growth estimate for July from a monthly rise of 0.1% to a fall of the same amount after fresh economic data revealed a worse hit for car manufacturing caused by global supply chain problems and shortages in computer chips, also known as semiconductors.

Reflecting a boom for holidaying in the UK while international travel restrictions largely remained in place, the latest snapshot showed activity in accommodation and food services, as well as the arts, entertainment and recreation, contributed the most to growth in the service sector of the economy.

The accommodation sector grew by 23% on the month, driven by spending at hotels and campsites during the key month of the school holidays for holiday destinations across the country.

Although air transport continued to expand as restrictions on foreign travel were gradually lifted – taking off by 27.5% in August – the figures showed activity remained 75% below pre-Covid levels.

Kevin Brown of the investment manager Scottish Friendly said the GDP figures were positive on face value but served as a reminder of the pressures bearing down on the British economy during a burgeoning cost of living crisis.

“In August, people were still enjoying the fruits of the end of lockdown, as the strong growth for services, holidays and dining out in the data suggests. Fast forward two months and that expansion has turned into a squeeze as cost pressures and overwhelming demand catch up,” he said.

Growth in August was offset by a decline in the health sector amid a drop in testing and vaccinations for Covid-19. Retail sales fell, reflecting shortages on the high street and consumers switching more of their spending from goods to services after the easing of pandemic controls.

Against a backdrop of pressure on international supply chains, production output – which includes manufacturing, energy and mining – grew by 0.8% whilecrude petroleum and natural gas output increa after recent temporary maintenance closures at an oilfield.

Challenges from soaring prices and shortages of materials including steel, concrete, timber and glass dragged down the construction sector, with output falling by 0.2% in August after a 1% drop in July.

Overall, the ONS said the economy remained 0.8% below its pre-pandemic level in August.

In a sign of continuing pressure on the economy, separate figures showed severe shortages of lorry drivers and supply chain disruption weighed heavily on UK trade volumes in August.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The ONS said goods exports fell by £1.3bn, or 4.6%, from a month earlier, and were driven by a sharp decline in shipments of cars and mechanical power generators to the EU and the rest of the world.

Paul Craig, a portfolio manager at Quilter Investors, said supply problems would no doubt weaken growth expectations for the months ahead as disruption caused by the coronavirus and Brexit dragged on the economy.

“The creaking UK economy is taking its time to spring back to life. The problems lie now not with demand but with supply. Acute labour shortages in several pockets of the economy along with chronic skills shortages have the potential to frustrate the economic recovery, and could well dampen any expectations for a strong economic revival over the winter months,” he said.

Contributor

Richard Partington Economics correspondent

The GuardianTramp

Related Content

Article image
New Covid variant and looming Brexit disruption deepen UK economic gloom
Our latest snapshot of key economic indicators show retail sales falling, job losses soaring, GDP growth and stock market stalling

Richard Partington Economics correspondent

23, Dec, 2020 @12:00 PM

Article image
UK economic growth slows in August despite 'eat out to help out'
GDP rose 2.1% but is lower than expected as Covid lockdown measures were relaxed

Richard Partington Economics correspondent

09, Oct, 2020 @6:19 AM

Article image
UK economic recovery slows sharply as GDP grows by 1.3%
Surging infection rates, the ‘pingdemic’, rising prices and supply constraints put the brakes on growth

Larry Elliott Economics editor

11, Nov, 2021 @7:39 AM

Article image
UK economy rebounds in March after rapid Covid vaccine rollout
GDP lifted by 2.1% that month and dropped by only 1.5% in first quarter of 2021

Phillip Inman

12, May, 2021 @7:17 AM

Article image
UK economy grew at record quarterly rate but recovery slowed in September
Growth surge follows easing of first lockdown but ONS data reveals recovery slowing fast

Larry Elliott Economics editor

12, Nov, 2020 @7:56 AM

Article image
UK economy hit by record slump in 2020 but double-dip recession avoided
ONS figures show GDP shrank 9.9% last year, the biggest decline since the Great Frost of 1709

Richard Partington Economics correspondent

12, Feb, 2021 @8:33 AM

Article image
UK economic recovery stalled in July amid worker shortages
GDP grew by only 0.1% despite removal of most Covid controls, with supply chain crisis making impact

Richard Partington Economics correspondent

10, Sep, 2021 @6:57 AM

Article image
UK economy grows for third month in a row as Covid controls ease
GDP rose by 2.3% in April, the fastest rate of growth since July 2020

Richard Partington Economics correspondent

11, Jun, 2021 @6:21 AM

Article image
UK edges towards double-dip recession as GDP falls 2.6%
Second national Covid lockdown in November ends six months of growth but decline not as bad as feared

Richard Partington Economics correspondent

15, Jan, 2021 @7:11 AM

Article image
UK's economic recovery from Covid-19 crisis continues
Rishi Sunak gives himself option of delaying autumn budget due to economic uncertainty

Richard Partington Economics correspondent

11, Sep, 2020 @6:24 AM