GDP returns to pre-pandemic levels with 0.9% growth

UK GDP grew by 0.9% in November 2021 and is above its pre-coronavirus level (February 2020) for the first time, by 0.7%.

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Rozi Jones
14th January 2022
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"The economy now stands 0.7% larger than in February 2020, thanks to an upward revision in the growth rate in October."

The latest data from the ONS shows that services (0.7%), production (1.0%) and construction (3.5%) output all increased between October and November 2021. This means that services and construction output are both 1.3% above their pre-coronavirus levels while production remains 2.6% below.

Output in consumer-facing services grew by 0.8%, mainly because of a 1.4% increase in retail trade.

If there are no other data revisions, quarterly GDP for Q4 2021 will either reach or surpass its pre-Covid level, provided the December estimate does not fall by more than 0.2%.

Derrick Dunne, CEO of YOU Asset Management, commented: “UK GDP has finally returned to pre-pandemic levels with better-than-expected growth of 0.9% in November, recovering from October’s stall and beating February 2020’s reading by 0.7%.

“But to say the economy is back on track is to paint the picture with a broad brush, while the smaller details in today’s data show we’re not quite out of the woods yet. For example, while retail trade continued to grow in November, consumer-facing services in general are still some 5.0% below their pre-Covid levels.

“It’s also worth remembering that today’s figures pre-date the worst of pre-Christmas Covid uncertainty, with fears over the spread of Omicron and the potential for new restrictions due to weigh heavily on consumer behaviour in December.

“Economists are predicting that UK economic growth could outstrip every other G7 nation this year, and today’s data is a timely reminder that investors should prepare to make the most of it. But with sky-high inflation and supply chain disruption still on the agenda, a resilient portfolio prepared for challenges is still the best solution.”

Richard Carter, head of fixed interest research at Quilter Cheviot, said: “For months now, the UK economy has been slowly ticking up and slowly returning back to pre-pandemic levels of normality. In October, we were just 0.5% below February 2020 GDP levels, and now in November we finally broke through pre-pandemic GDP levels after 0.9% growth. The economy now stands 0.7% larger than in February 2020, thanks to an upward revision in the growth rate in October.

“However, despite the strong figures in November, storm clouds were gathering in late November and early December with the emergence of the Omicron variant, so it is expected the growth weakens once Omicron feeds through into the numbers.

“While major restrictions were avoided, there’s no doubt that consumers would have been exercising more caution than expected in December, with businesses in the hospitality and leisure sector paying the price. Likewise, the UK economy would have lost a significant number of working days in December due to isolations.

“Combine this with a cost of living crisis that is quickly becoming the most important political issue and you have a recipe for a tough economic environment over the winter months. We’ve seen weaker than expected Boxing Day sales recorded and this could well be a barometer for weak consumer spending going into 2022.”

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, added: "The UK economy was in fitter form than expected before Omicron hit, with construction and manufacturing sectors flexing their muscles with a jump in activity. Growth overall came in at 0.9% significantly higher than the forecast 0.4%. That pushed UK output to 0.7% above its pre-pandemic level, but it was the calm before the storm.

"With Omicron expected to be a short sharp shock rather than a lingering malaise, this November snapshot is likely to be taken as more evidence that once infection rates subside the economy will be in good enough shape to withstand further interest rate rises, to keep a lid on soaring inflation. However, there are also indications that supply chain snarl ups may have eased, with car output rising and construction materials reportedly easier to source, which could help limit the rise in prices to some extent."

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