UK progress stutters in February as price of residing squeeze looms

The Metropolis of London’s monetary district is seen as individuals stroll on the Millennium Bridge in London, Britain February 16, 2022. REUTERS/Henry Nicholls

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  • UK GDP progress slows to 0.1% m/m in February from 0.8% in January
  • Lowered COVID bills, much less automobile manufacturing, storms accountable
  • Some economists concern Britain’s economic system is heading for a contraction within the second quarter
  • Hovering price of residing reduces family disposable earnings

LONDON, April 11 (Reuters) – Britain’s economic system slowed extra sharply than anticipated in February, reflecting a success to automobile manufacturing from part shortages, storm disruption and decreased healthcare spending as households had been bracing for a tighter minimize in the price of residing.

Month-to-month gross home product progress was simply 0.1% in February from 0.8% in January, the Workplace for Nationwide Statistics stated on Monday, beneath the 0.3% forecast by economists in a ballot. Reuters.

“The information that the economic system was barely rising in February … raises the chance of a contraction in GDP within the coming months as stress on actual family incomes intensifies,” Ruth stated. Gregory, senior British economist at Capital Economics.

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Britain’s economic system in February was 1.5% greater than it was two years earlier, simply earlier than the nation was hit by the COVID-19 pandemic, the ONS stated.

GDP collapsed by greater than 9% in 2020, its greatest annual drop since simply after World Conflict I, however rebounded strongly in 2021 and suffered solely a modest hit from the Omicron variant of the coronavirus in december.

Nonetheless, economists have lowered their progress forecasts for 2022 because of a spike in inflation attributable to rising vitality and commodity costs – partly linked to the struggle in Ukraine – in addition to ongoing provide chain difficulties for the reason that pandemic.

Final month, the federal government’s Workplace for Price range Duty minimize its forecast for progress in 2022 to three.8% from 6.0% in its earlier forecast in October, predicting inflation would hit a 40-year excessive. 8.7% later this 12 months.

The stress on family disposable earnings from increased inflation and a rise in payroll taxes which took impact in April would be the best since data started in 1956/57, the OBR stated.

Finance Minister Rishi Sunak, whose recognition plummeted after providing solely restricted help to assist households in a funds assertion final month, stated he welcomed continued progress .

Nonetheless, some analysts imagine the economic system will contract within the three months to June, reflecting decreased COVID-related healthcare spending and an extra financial institution vacation to mark Queen Elizabeth’s Golden Jubilee, in addition to a discount in family disposable earnings.

“Given this weak near-term outlook for GDP progress, we proceed to imagine that the (Financial institution of England) will cease elevating its Financial institution Price after elevating it to 1.0% subsequent month. “stated Samuel Tombs of Pantheon Macroeconomics.

Britain’s dominant service sector boosted month-to-month progress in February because the Omicron wave of coronavirus instances waned.

Companies output, up 0.2%, was boosted by a rise in journey bookings as COVID-19 restrictions eased, though this was greater than offset by a pointy decline in journey spending. well being after COVID-19 testing and vaccination halved from January’s excessive.

Manufacturing unit output fell 0.4%, reflecting continued declines in auto manufacturing because of part shortages and declines in different areas, whereas milder-than-usual winter climate lowered the demand for electrical energy, resulting in a drop in electrical energy manufacturing of 1.0%.

Storms and rising materials prices damage building, the place manufacturing fell 0.1% within the month.

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Reporting by David Milliken, enhancing by William Schomberg and Ed Osmond

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