Official figures show that the UK economy started stronger than expected this year with a 0.7 per cent output growth due to the lifting of the Covid-19 ban.
One forecaster warned that this year could be “as good as it gets” in light of the cost of living and the war in Ukraine. Economists forecast a marginal growth of 0.2 percent of gross domestic product (GDP) in January.
The Plan B restrictions, which were in place in early December to reduce the spread of the Omicron variant, were not lifted in late January. These include working from home guides, returning face masks in most indoor settings, and covid passes for access to larger areas.
A return to the hospitality and retail sectors, which were most affected by the sanctions, pushed GDP above pre-epidemic levels for the first time, according to figures from the Office for National Statistics. Output at the beginning of the year was 0.8 percent higher than was recorded in February 2020 before the epidemic.
Wholesale and retail sales rose 2.5 percent in January compared to December, while they fell 3.2 percent. Restaurants and hotels recorded a 3 percent increase in output after a 1.7 percent decline at the end of last year. Overall, output in customer-oriented services rose 1.7 percent after declining 0.2 percent in December.
Ten out of thirteen sub-sectors of the economy have recorded GDP growth. The shortfall in supply led to a 1.1 percent increase in construction output and a 0.8 percent increase in output, both in the third consecutive month.
Output in the health sector rose 1.3 percent as a result of an increase in GP visits after fears of Omicron subsided, following a 2.4 percent increase in December. This is despite the decline in test-and-trace activity.
Kitty Usher, chief economist at the Institute of Directors, said business leaders would be relieved to hear that the year had a strong start to the economy. “We expect this trend to continue through February,” he said. “Looking ahead, the key economic question is whether consumers still have the ability to make reasonable expenditures, whether they are happier about the virus retreat than concerned about the financial impact of the horrific news in Ukraine.”
According to Paul Dales, chief economist at Capital Economics Consultancy in the United Kingdom, some returns to activity will flow in February after the lifting of the Omicron restrictions as cases were still high in the first half of January.
However, he said: “The cost of the life crisis and the impact of the war in Ukraine is probably the best for the year.”
Dales hopes that rising electricity prices, partly due to the war in Ukraine, will hit the family’s real disposable income and that higher taxes will begin to be felt from March and April.
“For example, GDP growth is likely to be slow throughout the year. By filtering out high inflation in the wake of higher price / wage expectations, this will not prevent the Bank of England from raising interest rates further, possibly with the next hike on Thursday. . . 0.50 percent to 0.75 percent. “
Sage Sunak, who delivered his spring statement on March 23, said: “We know that Russia’s invasion of Ukraine is creating significant economic uncertainty and we will continue to monitor its impact in the UK, but it is vital to stand by our people. Ukraine will uphold our values of independence and democracy and ensure Putin’s failure. “
The central bank’s monetary policy committee will meet on Thursday to decide on interest rates and quantitative easing.