During the fourth quarter of 2020, the United Kingdom's GDP eased its decline from the previous quarter to register a year-over-year growth rate of -7.34%. Inflation eased to a year-on-year growth rate of 0.53% during the fourth quarter. The economic effects of the Covid-19 pandemic continued to be reflected in the labor market, resulting in an increase in the unemployment rate and a slowdown in job creation. For its part, the pound sterling appreciated against the dollar, recording an average exchange rate of 1.32 $/£ during the fourth quarter.


Macroeconomic outlook report: UK 4Q20

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Macroeconomic overview

  • During the fourth quarter of 2020, UK GDP eased by 1.14 percentage points from the previous quarter to a year-on-year rate of change of -7.34%. This result was mainly due to the partial recovery of domestic demand, driven by the relaxation of the containment measures implemented to contain the spread of the virus.
  • Regarding the labor market, the unemployment rate increased by 0.30 p.p. compared to 3Q20, to stand at a rate of 5.10%. Meanwhile, employment in the UK recorded a year-on-year growth rate of -1.64% during the fourth quarter of the year, after a slowdown of 0.89 p.p. compared to the previous quarter.
  • During the fourth quarter, the British pound sterling appreciated by $0.03 per pound compared to the previous quarter, to an exchange rate of 1.32 $/£.
  • Inflation decreased from the previous quarter to a rate of 0.53%. 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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