The UK economy rebounded at a faster-than-expected pace at the start of the year after the impact of the Omicron variant eased, data released by the Office for National Statistics revealed Friday.
Gross domestic product grew 0.8 percent in January, in contrast to the 0.2 percent fall in December. Economists had forecast a marginal growth of 0.2 percent for January.
GDP was 0.8 percent above its pre-coronavirus level. In three months to January, GDP advanced 1.1 percent from the previous three months.
All sectors expanded in January with services contribution the most to the growth. Services output posted 0.8 percent expansion, underpinned by wholesale and retail trade.
Industrial production was up 0.7 percent, preliminary driven by 0.8 percent growth in manufacturing.
Economists had forecast industrial output to grow 0.1 percent in January after rising 0.3 percent in December. Similarly, growth in manufacturing was seen unchanged at 0.2 percent.
On a yearly basis, industrial output growth improved to 2.3 percent from 0.4 percent. Likewise, manufacturing gained 3.6 percent after rising 1.3 percent.
Construction output increased 1.1 percent, following an increase of 2.0 percent in December.
With high inflation filtering into higher price/wage expectations, this would not stop the Bank of England from raising interest rates further, with the next hike on Thursday, Paul Dales, an economist at Capital Economics, said.
Russia’s invasion of Ukraine has increased the risk of a recession in the UK by exacerbating the already acute inflationary squeeze on consumers and businesses and derailing the supply of critical commodities to many sectors of the economy, Suren Thiru, head of economics at the British Chambers of Commerce, said.
In a separate communiqué, the ONS said the trade deficit increased sharply in January due to the surge in imports from EU countries.
The visible trade deficit widened to GBP 26.5 billion from GBP 12.35 billion in December. In the same period last year, the shortfall was GBP 15.3 billion. The expected deficit was GBP 12.6 billion.
There was a 20.7 percent decrease in exports to EU countries, while exports to non-EU countries increased 4.2 percent. Imports from EU countries gained 24.3 percent, while imports from non-EU countries remained flat.
Data showed that merchandise exports fell 15.8 percent on month, reversing a 3.1 percent rise in December. At the same time, growth in imports accelerated to 21.8 percent from 1.4 percent.
Meanwhile, the trade in services resulted in a surplus of GBP 10.34 billion, which was bigger than December’s GBP 10.02 billion surplus.
Consequently, the total trade balance showed a record deficit of GBP 16.2 billion versus a GBP 2.34 billion deficit in December.
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