Danni Hewson, AJ Bell Financial Analyst, comments on the latest UK GDP estimate:
“It was the month the UK was supposed to start “living with covid” but if February is an indication of what that life will look like, the UK economy is in trouble. There was growth, but barely, the scaling back of covid testing programmes and with the booster boost long gone the economy was left limping, further hampered by a car industry still plagued by chip shortages and spiralling costs. And that was before Russia invaded Ukraine, pushing up prices of crucial metals even further, snarling up supply chains once again and sending energy costs into the stratosphere.
“A downbeat production sector means a greater reliance on services for growth and with the cost-of-living crisis only just really baring its teeth there is concern that this month’s anaemic growth might be as good as it gets for a while.
“And the service sector had it fair share of problems in February not least from staff sickness and the triple ravages of February storms. Businesses as disparate as accountants and beauticians said their trade had been impacted by the blustery weather which kept people safely indoors. The strong winds also delayed building work though fencing services got a late month surge in demand as the country dealt with the destruction.
“But perhaps the awful weather was also responsible for one of the month’s bright spots as Brits rushed to finally book their ticket to some sunshine as travel restrictions were put to bed. Travel agents enjoyed a surge in demand, though many of those that did make bookings may have found themselves caught up in the getaway chaos that’s been making headlines over the last couple of weeks. But services are still on the front foot and hotels, B&Bs and other accommodation threw open their doors to enthusiastic half-term holiday makers and started dreaming of the return of in-bound tourists. Foreign travellers will be crucial if UK holidaymakers all head out of country but there are indications the return of foreign travellers is slow, in part because of high numbers of covid cases.
“The UK economy is fragile, and inflation has grabbed hold like a fever and the weakness displayed does raise some serious concerns about how well it can cope with the medicine needed to counteract the symptoms.”