GDP bounced back by 0.8% in January after December’s Omicron-induced fall.
Consumers stampeded back to bars, restaurants and shops as restrictions lifted while supply chain issues eased for a booming construction sector.
Danni Hewson, AJ Bell financial analyst,comments on GDP monthly estimate, UK – Office for National Statistics: “It had become a familiar story. Free from restrictions people fight for their “normal” with a joie de vivre that boosts almost every part of the economy. Then a variant raises its ugly head, and all the confidence is sucked out leaving consumer-facing services in particular back in a pretty pickle. Such was the case with Omicron, though December’s empty streets feel a world away from the hustle and bustle of today. And that hustle and bustle has helped the service sector recover significantly although the last Covid wound was particularly deep coming as it did during the all-important “golden quarter”.
“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.
“But overall, January strived to set an upbeat tone for 2022. New films and TV programmes were being made, ready to tantalise us into keeping on those increasingly expensive streaming subscriptions. Music was being made, games being played, and doctors being visited, the vibrancy in the communication sector beaten by that from human health and social work activities. And whilst the big booster boost faded in January, track and trace saw a surge in demand.
“Of particular note in these latest figures a third month of significant growth for the construction sector which also reported that supply chain issues that had been such a major headache were finally beginning to ease. And that’s where alarm bells really begin to ring. The war in Ukraine has changed the anticipated path of economic recovery, supply issues are returning, and prices are rising. Even before the Russian invasion many businesses were experiencing issues with rising costs, particularly when it came to their energy bills and to their wage bills.
“The labour market is tight the cost of living is high and getting higher and the pressure to pay more for labour will only increase despite earlier calls from the Bank of England’s governor for restraint. After dusting itself off from its last tussle with Covid the UK economy had seemed to have found a new gear but how far and how fast can the engine run as those inflation temperatures continue to rise.”