The UK economy grew by a better than expected 0.8% in January, according to official figures as the chancellor faces intense pressure to deliver support to businesses and families to maintain the recovery from the coronavirus crisis.
The Office for National Statistics (ONS) reported that the growth was driven by a return to consumer spending following December’s decline of 0.2% – widely blamed on disruption caused by rules to stop the spread of the Omicron COVID variant.
Economists had forecast January growth of just 0.2%.
ONS director of economic statistics Darren Morgan said: “GDP bounced back from the hit it took in December due to the Omicron wave and is now 0.8% above its pre-pandemic peak.
“All sectors grew in January with some industries that were hit particularly hard in December now performing well, including wholesaling, retailing, restaurants and takeaways.
“Computer programming and film and television production also had a good start to the year.”
But the focus of the challenge facing Rishi Sunak, ahead of his spring statement “mini-budget” on 23 March, has now changed too from one of pandemic recovery to one of combatting a mounting inflation threat.
It is mostly a consequence of rising energy costs since last summer but one that has moved up several gears because of the Russian invasion of Ukraine.
Price spikes that have sent oil costs to 14-year peaks this week, unprecedented natural gas costs and big increases in other commodities such as wheat, are all making their way through the supply chain to consumer prices.
Households, 22 million of them, were already facing down a 54% leap in the energy price cap on 1 April – with more hikes clearly on the way – and the chancellor has been warned his support to date is inadequate.
The Institute for Fiscal Studies said this week that he is under pressure to borrow billions more to help compensate for the rising bills or risk the biggest squeeze from the rising cost of living in decades.
UK Inflation was already at its highest level for almost 30 years before Vladimir Putin’s forces entered Ukraine.