Economy rebounds above pre-COVID levels for first time, but fears over Omicron hit | Economic news

The UK economy grew stronger than expected in November before the Omicron variant hit, rebounding above pre-pandemic levels for the first time.

The Office for National Statistics (ONS) said gross domestic product (GDP) rose 0.9% in the month, compared to a rise of just 0.1% in October.

Analysts had predicted a 0.4% rise in November.

This meant the world’s fifth-largest economy was 0.7% larger than it was in February 2020, the ONS said.

However, despite the acceleration in growth in November, GDP was likely hit in December when the Omicron variant of the coronavirus swept the world.

The loss of momentum likely extended into January, with many businesses reporting severe staff absences and consumers still hesitant to step out.

But health officials believe the wave of Omicron infections has now peaked in the UK and economists say the impact on the economy is likely to be short-lived, allowing the Bank of England to continue to raise interest rates.

Office of National Statistics chief economist Grant Fitzner said: “The economy grew strongly in the month before the Omicron strike, with architects, retailers, couriers and accountants having a bumper month.

“Construction also recovered from several weak months as many raw materials became easier to obtain.

“This means that monthly GDP exceeded its pre-pandemic level for the first time in November.”

Chancellor of the Exchequer Rishi Sunak said the higher-than-expected GDP figures were due to the “courage” of the public.

He said: “It’s amazing to see the size of the economy return to pre-pandemic levels in November – a testament to the courage and determination of the British people.

“The government continues to support the economy, including through grants, loans and tax breaks for businesses, and our jobs plan is ensuring people across the country have fantastic opportunities.

“We all have a vital role to play in protecting lives and jobs, and I urge everyone to do theirs by getting boosted as soon as possible.”

CBI Chief Economist Alpesh Paleja said: “While it is good that economic growth picked up in November, the data has been overtaken by events.

“It is very likely that activity took a hit in December as the spread of the Omicron variant and subsequent restrictions disrupted operations in some sectors.

“As we enter the new year, the near-term outlook is also clouded by additional challenges: labor shortages – exacerbated by sickness absences, supply chain disruptions and a household cost of living.

“Implementing Plan B in December was the right thing to do, but with COVID clearly here to stay, the government must now act to avoid the need for further activity restrictions.

“This includes providing clearer forward guidance to support business adaptation, prioritizing mass testing over mass self-isolation and ensuring travel controls are proportionate so that the UK remains open to the rest of the world.”

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “Stronger growth in November is likely to be followed by a modest decline in output in December and January as consumers are cautious to socialize and spend, and increased staff absences caused by Omicron and Plan B limit activity.

“While the UK economy is expected to rebound once Plan B measures are lifted, soaring inflation and continued supply chain disruption could mean that the UK’s economic growth outlook will remain under pressure for a while. much of 2022.

“The government must do everything in its power to support the economy during this difficult time.

“If the current restrictions persist or are further tightened, a more comprehensive support package commensurate with the scale of any new measures will need to be put in place.”

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