An unhappy new year for UK economy

BRITAIN’S economy shrank nearly 5 per cent in January, official figures are expected to confirm on Friday.

The Office for National Statistics is expected to say that gross domestic product, the measure of an economy, shrank 4.9 per cent at the start of the year, reversing the 1.2 per cent growth achieved in December. Year on year, the economy is believed to have shrunk by 11.2 per cent.

While the pre-christmas shopping boom and a stronger than expected economic performance in December helped Britain avoid a double-dip recession, the current lockdown, seasonally reduced activity and coronavirus restrictions are likely to result in first quarter GDP shrinking.

CMC Markets chief market analyst Michael Hewson said: “Having seen a gain of 1.2 per cent in December, the monthly GDP number for January is likely to be a sobering affair, given the tighter measures imposed at the beginning of the month.

“Services in particular are expected to take a hammering, and while the UK economy appears to have avoided the dreaded double-dip recession, the only unknown about the contraction we’re about to see in the first quarter of 2021 is how big is it likely to be.”

Friday will also see the ONS release the latest industrial and manufacturing output figures, both of which are expected to be disappointing.

Industrial output is forecast to be down 0.3 per cent for January, while manufacturing is tipped to have shrunk by 0.2 per cent.that compares to growth of 0.2 and 0.3 per cent respectively for industrial and manufacturing output the month before.