Further to our previous article on the UK economy, the latest report from the Office for National Statistics (ONS) shows that the UK economy has now moved beyond its pre-pandemic size in February 2020
UK Economy
The latest report from the ONS shows that GDP grew by 0.9% in November 2021, following GDP growth of just 0.2% in October 2021 (the October figure having been revised upwards from 0.1%). This means that the UK economy is now 0.7% larger than its pre-pandemic level in February 2020, with GDP growing overall within the UK economy by 1.1% in the 3 months to November 2021.
The November 2021 GDP figures were above expectations, as economists had forecast growth of around 0.4% in the UK economy.
Early Christmas shopping and strong Black Friday sales were two of the factors behind the higher than expected GDP figures, with retail spending increasing by 1.4% during the month.
As a whole, the services sector expanded by 0.7% and by 1.3% in the 3 months to November 2021, and is now 1.3% above its February 2020 pre-pandemic level. Professional, scientific, and technical activities was the area with the strongest growth, with growth of 2.5%. Nevertheless, one part of the services sector that has yet to recover to pre-pandemic levels is consumer-facing services, which remains 5% below its pre-pandemic size.
The construction sector is also now 1.3% above its pre-pandemic level, having grown by 3.5% in November 2021, and by 1.6% in the 3 months to November 2021. The November 2021 statistics represent a strong recovery from setbacks that occurred in October 2021, when it had contracted by 1.7%
Nevertheless, the production sector remains 2.6% below its pre-pandemic level, although during November 2021 it grew by 1%. However, during the 3 months to November 2021 as a whole, the sector contracted by 0.1%, with GDP having fallen in both September 2021 (by 0.7%) and October 2021 (by 0.5%). The November 2021 increase of 1% was mainly driven by an increase in manufacturing, which grew by 1.1%
Nevertheless, the ONS warn that the performance of the UK economy has been adversely impacted by the Omicron variant, and that that is likely to be reflected in the December 2021 GDP figures and other data relating to the UK economy going forward
Unemployment, Inflation, and Consumer Confidence
The continuing recovery of the UK economy is also reflected in the latest employment statistics. Unemployment fell by 0.4% to 4.1% in December 2021 according to the latest ONS figures, although the economic inactivity rate also increased at the same time by 0.2% to 21.3%.
In tandem with the fall in unemployment, the number of payrolled employees increased to a new record of 29.5 million. That represents an increase of 184,000 compared to November 2021, and is 409,000 higher than the pre-pandemic peak in February 2020
Back on the 25th November 2021, we reported that the number of job vacancies in the UK economy had reached 1,172,000, reflecting the fact that there are severe labour shortages in the economy. The latest ONS figures show that the number of job vacancies in the UK economy has increased again to a new record of 1,247,000. Nevertheless, the rate of increase has fallen, indicating that the number of vacancies will shortly peak.
However, whilst average pay in the 3 months to November 2021 increased by 4.2%, inclusive of bonuses, and by 3.8%, exclusive of bonuses, that has to some extent been offset by the surging rate of inflation. Inclusive of bonuses, real wages increased by just 0.4%, whilst exclusive of bonuses, there was no increase at all (i.e. it was static at 0.0%).
Inflation as measured by the Consumer Prices Index (CPI) has increased again in the 12 months to December 2021 to 5.4%. That is up 0.3% from 5.1% in November 2021. That could well mean that when the next average earnings figures are released, they could show a fall in real wages.
The main contributors to the increase in inflation according to the ONS were: “food and non-alcoholic beverages, restaurants and hotels, furniture and household goods, and clothing and footwear.” Stagnant wages and the increase in consumer goods are just the first signs of the much talked about costs of living crises within the UK economy. However, the worst is yet to come for the UK economy, with energy bill predicted to rise to over £1,900.00 on average in April 2022, with further rises in October 2022, which some forecasters believe could push energy bills to well over £2,000.00 on average
