During the third quarter of 2021, the United Kingdom's GDP decelerated its recovery with respect to the previous quarter, registering a year-over-year growth rate of 6.55%. Inflation increased at a year-on-year growth rate of 2.77%. The labour market continued to recover from the economic effects of the Covid-19 pandemic, resulting in a slight decrease in the unemployment rate and an acceleration in employment. In addition, the pound sterling depreciated against the dollar, recording an average exchange rate of 1.38 $/£ during the third quarter.

Macroeconomic outlook report: UK 3Q21

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Macroeconomic overview

  • During the third quarter of 2021, UK GDP declined by 17.03 percentage points from the previous quarter to a year-on-year rate of change of 6.55%. This correction in the year-on-year rate was driven by the fall in domestic demand, as all its components declined due to a higher comparative rate, with the decline in household consumption (13.97 p.p.) standing out.
  • Regarding the labor market, the unemployment rate decreased by 0.40 p.p. compared to 2Q21, to stand at a rate of 4.30%. Meanwhile, employment in the UK recorded a year-on-year growth rate of 0.53% during the third quarter of the year, after an acceleration of 1.54 p.p. compared to the previous quarter.
  • During the third quarter, the British pound sterling depreciated by $0.02 per pound compared to the previous quarter, to an exchange rate of 1.38 $/£.
  • Inflation increased from the previous quarter to a rate of 2.77%. Thus, CPI managed to surpass even more the Bank of England's 2% target, largely reflecting the global supply-chain problems.

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