By David Milligan
LONDON (Reuters) – The UK economy slowed sharply in February, reflecting a drop in auto production due to a shortage of spare parts, storm surges and declining health costs as families prepare themselves.
Monthly gross domestic product (GDP) growth was just 0.1% in February and 0.8% in January, the National Statistics Office (ONS) said on Monday. 0.3% forecast by economists in a Reuters poll.
“The news that the economy is barely growing in February … raises the risk of a contraction in GDP in the coming months as real household incomes intensify,” said Ruth Gregory, a senior UK economist on the capital economy.
The UK economy was 1.5% larger than it was two years ago in February, shortly before the country was hit by the Govt-19 epidemic, ONS reported.
GDP fell by more than 9% in 2020, its biggest annual decline since World War I, but it recovered sharply in 2021 and suffered only a modest impact from the Omicron variant of the corona virus in December.
However, economists have lowered their growth forecasts for 2022 because of rising inflation caused by rising energy and commodity prices – partly linked to the war in Ukraine – as well as supply chain problems following the epidemic.
Last month, the government’s Office for Budget Responsibility (OBR) lowered its 2022 growth forecast to 3.8% from 6.0% in its previous forecast for October, predicting that inflation would reach 8.7%, the highest level in 40 years this year.
The OBR has said that since the start of the record in 1956/57, the contraction on disposable income from home use will be huge due to the high inflation and wage tax hike that took effect in April.
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