How is the economy really performing and what lies ahead? What shape could the recovery take? The January growth numbers and March Budget data provide some of the answers to these pressing questions.
The January numbers – the first monthly set of data since the UK officially left the EU – help us to understand how the economy has fared through the third lockdown.
Gross domestic product (GDP), the most common measure of economic growth, is estimated to have fallen by 2.9% during the month, as a result of government restrictions. The slowdown left the UK economy 9% smaller than at its pre-pandemic peak. But the GDP drop was considerably less than many economists expected; it also contrasts with the 18% slump in April 2020 during the first lockdown.
In January non-essential shops were closed, office workers mainly continued to work from home and millions of children were not in classrooms. Hospitality venues were shuttered, contributing to a 3.5% decline in the services sector activity. But the construction sector bucked the trend, growing by 0.9%.
The total value of EU imports tumbled by 29%, while exports slumped by 40%, the largest monthly decline since records began in 1997. This may be a temporary phenomenon, as businesses in the UK and EU adjust to the new rules, but we should not underestimate the impact on the economy.
