Latest figures from the Office for National Statistics [ONS] show that UK economic growth slowed in February, with automotive and computer goods production falling.
Economic growth stood at 0.1 per cent in February, meaning the UK economy stood at 1.5 per cent above pre-pandemic levels seen in February 2020.
Nevertheless, the 0.1 per cent growth seen in February 2022 was a sharp slowdown compared to the 0.8 per cent registered the previous month. It was also below the 0.3 per cent that has been forecast by economists.
The drop in manufacturing output was offset by growth in the services industry, with tourism and travel among the services areas that enjoyed strong performances after post-Omicron spending persisted.
The ONS explained that a 5.4 per cent fall in the manufacture of transport equipment driven by less car production was behind the overall fall in manufacturing output.
The construction industry also experienced contraction after projects were delayed due to adverse weather, but shrinkage came at a slower rate than that seen in industrial production.
While experts had expected a slowdown when the Covid bounce-back effect wore off and the cost-of-living crisis began to take real effect, it has come about earlier than predicted.
Ruth Gregory, senior UK economist at Capital Economics, commented: “The pace of the recovery was already going to slow once the post-Omicron bounce faded and the squeeze on household real incomes intensified. But we hadn't expected it to slow so much so soon.”
Alpesh Paleja, the Confederation of British Industry’s lead economist, said that the impact of the conflict in Ukraine was also “exacerbating cost pressures and supply chain disruption.”
This point was also echoed by chancellor, Rishi Sunak, who said that Russia’s invasion was “creating additional economic uncertainty” in the UK but “welcomed” news that the economy expanded.
PricewaterhouseCoopers UK said that a shortage of semiconductors has been largely to blame for a drop-off in manufacturing output, with several European economies afflicted with the problem.
PwC UK’s senior economist, Barret Kupelian, added that higher energy prices would also begin to take their toll on the sector in future.
“Manufacturing is also likely to face headwinds due to high energy prices as it consumes above average energy per unit of GDP and we will see this reflected in future data releases,” Kupelian said.
Kupelian also said that the fall in manufacturing will see growth move back toward sectors which were most subdued during the pandemic, such as “accommodation and food services, activities and arts, entertainment, and recreation”.
He said: “We expect that there is still more growth to come from these sectors.”
Photo by Mathieu Stern on Unsplash
