UK economy bounced back in January 2022
In the three months to January 2022, GDP grew by 1.1%.
GDP is now 0.8% above its pre-coronavirus level (Feb 2020), according to the Office for National Statistics (ONS).
It said it bounced back after falling 0.2% in December amid the Omicron variant and ‘Plan B’ covid curbs.
All sectors grew in January 2022, with services up 0.8%, production up 0.7% and construction up 1.1%.
Overall, services output is 1.3% above its pre-coronavirus pandemic level, following a 0.5% fall in December 2021.
The ONS noted output in consumer-facing services grew 1.7% in the month, mainly driven by a 6.8% increase in food and beverage activities.
However, consumer-facing services are still 6.8% below their pre-coronavirus levels.
Turning to GDP between February 2020 and January 2022, the ONS revealed human health and social work activities were the main drivers to monthly GDP though increases in the NHS Test and Trace programme were offset by a decrease in the number of vaccinations, following the booster drive in December.
Information and communication was the second largest contributor to the growth in services, which grew by 2.9%. Computer programming, consultancy and related activities grew by 6.5% and motion picture, video and tv programme production, sound recording and music publishing activities grew by 6.7% in January 2022.
‘Exceeded expectations’ but ‘as good as it gets for this year’
Danni Hewson, AJ Bell financial analyst, said: “Even though January was still weighed down by its Covid shackles for a time and there were many businesses struggling with staff sickness, people just wanted to start the new year on a new footing.
“Bars and restaurants took in some of the cash that didn’t make it into December’s tills, and wholesalers rushed to supply them. Shops were busier than normal, and those Christmas blockbusters did finally find an audience. The scale of January’s bounce back exceeded expectations but it’s important to note that whilst the service sector as a whole is back above pre-pandemic levels, consumer facing services still have much ground to make up.”
Paul Dales, chief UK economist at Capital Economics, said: “The cost of living crisis and the influence of the war in Ukraine probably means that the 0.8% m/m leap in GDP in January is as good as it gets for this year.
“Looking ahead, as Omicron cases were still very high in the first half of January, some of the rebound in GDP may have flowed into February. But some of that boost may have been offset by the influence of storm Eunice. And the hit to households’ real disposable incomes from the surge in energy prices, the latest chunk of which is due to the war in Ukraine, and higher taxes will start to be felt from March and April. As such, GDP growth will probably slow throughout the year.
“With high inflation filtering into higher price/wage expectations, this won’t stop the Bank of England from raising interest rates further, with the next hike on Thursday (probably by 25bps from 0.50% to 0.75%).”