20th February 2022
Data released last month by ONS revealed that UK economic output fell by 0.2% in December as people increasingly worked from home and avoided Christmas socialising due to the spread
of the Omicron variant. This contraction, however, was less severe than many had feared, with a Reuters poll of economists having predicted a 0.6% monthly fall.
Despite December’s decline, GDP data covering the whole of last year showed the UK economy experienced a sharp rebound in 2021, following the dramatic pandemic-induced collapse in output recorded during the previous year. In total, the economy grew by 7.5% across 2021, the UK’s largest annual rate of growth since 1941.
More recent survey data also suggests there has been a swift rebound in economic activity following the disruption caused by Omicron at the turn of the year. The preliminary headline reading of the closely monitored IHS Markit/CIPS composite Purchasing Managers’ Index, for instance, rose to 60.2 in February from 54.2 in January.
This represents the fastest pace of growth in private sector output since last June, with a strong recovery in consumer spending on travel, leisure and entertainment fuelling the pickup in activity. IHS Markit’s Chief Business Economist Chris Williamson said the data pointed to a “resurgent economy in February” as COVID containment measures were relaxed.
Mr Williamson did though add a note of caution, saying that “indications of a growing plight for manufacturers” needed to be watched. He added, “Given the rising cost of living, higher energy
prices and increased uncertainty caused by the escalating crisis in Ukraine, downside risks to the demand outlook have risen.”