UK GDP rose 0.9% in November 2021, its highest level since its pre-pandemic rate of 0.7% in February 2020, but figures for December may look worse, experts have warned.
Output in November was up across all sectors, with services the main contributor to the increase, according to the latest figures from the Office for National Statistics (ONS).
A 1.4% rise in retail trade revealed that shoppers were more confident in venturing back to the high street, with face-to-face services up 0.8%, although this was five percentage points below pre-pandemic levels.
However, December’s reading may not be so rosy, as fears over rising Omicron cases in may have impacted consumers’ willingness to visit physical shops in next month’s readings.
Cancellations in the hospitality industry were up 44% in December as Christmas gatherings were scrapped following government advice.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The new variant has been causing waves of turbulence for the services industry in particular.
“Employee absence rates rose sharply at the end of December, with 3% of the workforce estimated to be on sick leave or not working because of Covid symptoms or quarantine.”
Elsewhere, construction was up 3.5% in November, its highest increase since March 2021, as the sector recovered well from its 1.7% drop the month before, largely helped by new construction projects, which were up 5.7%.
Production was also up 1% having contracted in the previous two months. The sector is 2.6% below its pre-pandemic levels as supply chain hold ups continue to disrupt the industry.
Manufacturing was the largest contributor to the sector’s growth, increasing by 1.1% in November as car production rebounded. The shortages of car parts that have created delays in production came back into supply in November and car manufacturing was up 7.8% as a result.
However, a 1.3% increase in demand for electricity and gas will continue to add pressure on the sector, which is already struggling to meet production goals.
Today’s production rise is a good sign of recovery, but inflation will continue to rise until the sector catches up with its pre-pandemic levels.
Derrick Dunne, chief executive of YOU Asset Management, said: “Economists are predicting that UK economic growth could outstrip every other G7 nation this year and today’s data is a timely reminder that investors should prepare to make the most of it.
“But with sky-high inflation and supply chain disruption still on the agenda, a resilient portfolio prepared for challenges is still the best solution.”