During the first quarter of 2021, the United Kingdom's GDP eased its decline from the previous quarter to register a year-over-year growth rate of -6.14%. Inflation increased at a year-on-year growth rate of 0.60% during the first quarter. The labour market began 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. For its part, the pound sterling appreciated against the dollar, recording an average exchange rate of 1.38 $/£ during the first quarter.


Macroeconomic outlook report: UK 1Q21

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Macroeconomic overview

  • ​​During the first quarter of 2021, UK GDP attenuated its decline by 1.20 percentage points from the previous quarter to a year-on-year rate of change of -6.14%. This improvement in the economic situation was driven by the increase in domestic demand, as all its components, except household consumption (-1.21 p.p.) and gross fixed capital formation (-1.12 p.p.), rose, with the increase in public spending (4.50 p.p.) being noteworthy.
  • Regarding the labor market, the unemployment rate decreased by 0.30 p.p. compared to 4Q20, to stand at a rate of 4.70%. Meanwhile, employment in the UK recorded a year-on-year growth rate of -1.07% during the first quarter of the year, after an acceleration of 0.78 p.p. compared to the previous quarter.
  • During the first quarter, the British pound sterling appreciated by $0.06 per pound compared to the previous quarter, to an exchange rate of 1.38 $/£.Inflation increased from the previous quarter to a rate of 0.60%. Thus, CPI continued to remain well below the Bank of England's 2% target, largely reflecting the effects of Covid-19 on the economy.​

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