UK economic growth slows sharply as supply chain issues emerge

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The UK economy made little progress in October as supply chain disruption hit industry and construction, while the expansion of the service sector slowed.

British output only rose 0.1% between September and October, data from the Office for National Statistics showed on Friday.

The figure was lower than the 0.4% forecast by economists polled by Reuters, and it was a sharp drop from the 0.6% expansion the previous month.

Grant Fitzner, chief economist at the ONS, said the UK healthcare sector has grown sharply, while used car sales and employment agencies have also boosted the economy.

“Overall, the dominant service sector has reached its pre-pandemic level for the first time in twenty months,” he noted. However, he added that those gains were offset by lower activity in restaurants, which retreated after a strong summer, and by a reduction in oil extraction and gas consumption.

Construction saw its largest drop since April last year, with notable declines in housing construction and infrastructure, in part due to shortages of raw materials.

Production fell 0.6 percent and construction fell 1.8 percent due to widespread supply chain disruptions and shortages of goods and workers.

Service output rose 0.4% in October, with the largest contribution coming from healthcare activities, mainly driven by a continued increase in face-to-face appointments at GP practices in England.

Overall, UK production was still 0.5% lower in February 2020, before the pandemic.

Alpesh Paleja, chief economist of the CBI, said that “growth disappointed in October, reinforcing concerns about the resilience of the UK’s economic recovery to the Omicron variant and the impact of further restrictions”.

This is the latest UK GDP data ahead of the Bank of England’s interest rate decision next week. Economists expect the bank to postpone a rate hike amid concerns over the spread of the Omicron variant of the coronavirus.


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