UK GDP Comes in Better Than Forecast, Services Output Declines Sharply
The UK economy started 2021 on a weak footing, posting a contraction at the beginning of the year as the nation went into a fresh round of lockdowns to combat the newly discovered and more contagious strains of the coronavirus. According to data published by the ONS, UK’s GDP contracted by 2.9% MoM during the month of January, coming in better than economists’ forecast for a more severe contraction by 4.9% instead.
In addition, the decline in the GDP was less severe than when the country went into the first round of lockdown earlier in 2020 when the coronavirus pandemic struck initially. The lower level of contraction was fueled by better preparedness among businesses to handle the restrictions and a greater interest among consumers to indulge in spending activities.
However, the shutting down of non-essential businesses caused overall economic output of the services sector to fall by 3.5% during January. On an encouraging note, however, the construction sector managed to grow by 0.9% during this period.
On a year-to-year basis, January’s GDP was 9% lower than the corresponding month’s reading from 2020, before the pandemic had spread beyond China. The ONS remains hopeful about an improvement in economic activity since the mid of February as the government started easing restrictions and the vaccine rollout initiatives gather steam, which could drive the GDP towards positive territory for February and March.
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