Construction only bright spot as economy reverses in January

Construction only bright spot as economy reverses in January

 

Figures from the Office for National Statistics (ONS) show that January’s GDP was nine per cent below the levels seen in February 2020, compared with four per cent below October 2020 (the initial recovery peak).

Lockdown restrictions were in place to varying degrees across all four nations of the UK during January.

Overall, all main sectors of GDP remained notably below their pre-pandemic levels in February 2020 and all were lower than in October 2020.

However, the fall of 2.9 per cent in GDP was better than the figure of nearer five per cent expected by economists.

The services sector acted as the main drag on growth in January, decreasing by 3.5 per cent as restrictions on activity were reintroduced in response to the coronavirus pandemic. The services sector was 10.2 per cent below the level of February 2020 compared with 4.9 per cent below the level seen in October.

Derrick Dunne, CEO at Beaufort Investment, noted the services sector was always due to be a drag on numbers.

“Production and construction fared relatively well, with a fall of only 1.5 per cent and growth of 0.9 per cent respectively. But these were merely brighter spots in an otherwise gloomy picture,” he said.

“In a very real sense, the events of 2020 continue to haunt the economy, with GDP still nine per cent below its pre-pandemic levels.”

Kevin Brown, savings spokesman at Scottish Friendly, said: “We expect a household spending boom throughout spring and summer which could help push the UK’s economic output back above pre-pandemic levels.

“This will provide a much-needed shot in the arm for many businesses but it could potentially hurt some households in the long-run.

“If inflation rises sharply above the Bank of England’s two per cent target then families who have savings held in bank or building society accounts will see the value of their cash quickly eroded. We need to keep a watchful eye on the rate of consumer spending from April onwards to ensure that households don’t pay the price for driving the UK economy forward.”