Britain’s economic growth slowed more than expected in February as a slump in car manufacturing undermined a strong recovery in holiday bookings following the easing of Covid travel restrictions.
the Office of National Statistics said gross domestic product rose just 0.1% in February, compared to a monthly growth rate of 0.8% in January when the economy was recovering from the Omicron variant of the coronavirus.
City economists had forecast a monthly growth rate of 0.3%. Overall, the economy was 1.5% higher in February than its pre-pandemic level.
Raising questions about the strength of the economy ahead of Russia’s invasion of Ukraine in late February, manufacturing slumped as automakers continued to struggle to source parts amid market disruptions. global supply chain and shortage of vital components.
Activity in the sector fell 0.4% over the month, driven by a 5.4% drop in the manufacture of transport equipment and a 4.3% drop in computer, electronic and optical products, where the disruption in microchip availability has affected production volumes worldwide. .
Tourism rose sharply after the easing of pandemic restrictions led to an increase in the number of people booking holidays in the UK and abroad, with travel agencies growing 33.1% and tour operators. The accommodation sector, which includes hotels, saw activity rise 23% as more people traveled to the UK, contributing to the first month of positive growth for hotels and campsites since august.
However, growth in the economy’s service sector slowed amid a decline in the health sector, largely reflecting a setback from the high levels of NHS test and trace and vaccination programs in December. and January, when Omicron was at its peak.
The latest snapshot comes as business leaders and economists warn Britain is likely to struggle to secure growth in the months ahead as soaring energy bills and the rising cost of the weekly shop reduce the purchasing power of consumers.
“The news that the economy was barely growing in February suggests that the economy had a little less momentum in the first quarter than we had previously thought,” said Ruth Gregory, senior UK economist at the consultancy. Capital Economics. “[It] increases the risk of a contraction in GDP in the coming months as pressure on real household incomes intensifies.
Thomas Pugh, an economist at accounting firm RSM UK, said February could be the last month of growth for a while. “Spiking fuel prices, plummeting business and consumer confidence and supply chain disruptions will start to be felt from March and really gain momentum in April when fuel prices consumption will increase by 54%,” he said.
Some businesses said disruption from storms Dudley, Eunice and Franklin during the month hampered trade, including in the construction industry, restaurants and takeaways, hairdressing and beauty, parks and recreation and holiday centers. Some businesses have reported a positive impact, such as those from fencing, torch sales, and temporary off-grid power.
Reflecting the hit to the construction sector as sites were forced to close and cranes became idle amid the disruption, construction sector output fell 0.1% on the month.
Suren Thiru, head of economics at the UK Chambers of Commerce, said the government needed to provide more financial support to businesses and businesses to cope with mounting cost pressure.
“February’s slowdown will likely mark the start of an extended period of significantly weaker growth as rising inflation, rising energy bills and rising taxes increasingly hurt key drivers of output. UK, including consumer spending and business investment,” he said.
It comes amid growing pressure on Chancellor Rishi Sunak over his wife’s tax affairs and criticism for his statement in the spring last month about a lack of action to help those most in need during the COVID-19 emergency. Cost of life.
Sunak admitted the economy faced uncertainty, although he maintained that £22billion of rising cost of living support was being made available to households this year, along with £1,000 worth of tax cuts for half a million small businesses.
“Russia’s invasion of Ukraine creates additional economic uncertainty here in the UK, but it is right that we react strongly against Putin’s unprovoked invasion,” he said.