Economy regains pre-pandemic size

5th January 2022

Data released by the Office for National Statistics (ONS) revealed that the economy grew by 0.9% in November. This was much stronger than the consensus forecast predicted in a Reuters poll of economists and saw the UK economy recover all of the ground lost during the pandemic, with November’s output figure 0.7% above its February 2020 level.

Commenting on the figures, ONS Chief Economist Grant Fitzner said, “The economy grew strongly in the month before Omicron struck, with architects, retailers, couriers and accountants having
a bumper month. Construction also recovered from several weak months as many raw materials became easier to get hold of.”

Economic activity over the last two months, however, has clearly been hit by the spread of the Omicron variant. Data from IHS Markit/CIPS Purchasing Managers’ Index (PMI) reported a sharp slowdown in UK private sector growth in December and activity slipped further in January as Omicron again hit consumer-facing companies.

Disruption due to the rise in virus cases also contributed to the International Monetary Fund (IMF) cutting its 2022 global growth forecast. In its latest economic musings released on 25 January, the international soothsayer noted that the world economy was in a ‘weaker position’ than previously expected and downgraded its prediction for global growth by half a percentage point to 4.4%.

The updated IMF forecast also suggests the UK economy is set to grow more slowly than previously anticipated, with this year’s growth estimate cut to 4.7%. While this does represent a notable reduction from last October’s 5.0% forecast, it still leaves the UK as the fastest growing economy among the G7 industrialised nations.