{"id":4344,"date":"2022-02-01T12:34:42","date_gmt":"2022-02-01T12:34:42","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/?p=4344"},"modified":"2022-02-01T12:37:37","modified_gmt":"2022-02-01T12:37:37","slug":"economic-review-january-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/02\/01\/economic-review-january-2022\/","title":{"rendered":"Economic Review – January 2022"},"content":{"rendered":"
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Economy\nregains pre-pandemic size<\/strong><\/p>\n<\/div>\n\n

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The UK\neconomy grew strongly in November to move beyond its pre-COVID level with\nincreasing momentum recorded across all industry sectors prior to the arrival\nof the Omicron variant.<\/strong><\/p>\n<\/div>\n\n

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Data\nreleased by the Office for National Statistics (ONS) revealed that the economy\ngrew by 0.9% in November. This was much stronger than the consensus forecast\npredicted in a Reuters poll of economists and saw the UK economy finally\nrecover all of the ground lost during the pandemic, with November\u2019s output\nfigure 0.7% above its February 2020 level.<\/p>\n<\/div>\n\n

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Commenting\non the figures, ONS Chief Economist Grant Fitzner said, \u201cThe economy grew\nstrongly in the month before Omicron struck, with architects, retailers,\ncouriers and accountants having a bumper month. Construction also recovered\nfrom several weak months as many raw materials became easier to get hold of.\u201d<\/em><\/p>\n<\/div>\n\n

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Economic\nactivity over the last two months, however, has clearly been hit by the spread\nof the Omicron variant. Data from IHS Markit\/CIPS Purchasing Managers\u2019 Index\n(PMI) reported a sharp slowdown in UK private sector growth in December and activity\nslipped further in January as Omicron again hit consumer-facing companies.<\/p>\n<\/div>\n\n

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Disruption\ndue to the rise in virus cases also contributed to the International Monetary\nFund (IMF) cutting its 2022 global growth forecast. In its latest economic\nmusings released on 25 January, the international soothsayer noted that the\nworld economy was in a \u2018weaker position\u2019<\/em> than previously expected and\ndowngraded its prediction for global growth by half a percentage point to 4.4%.<\/p>\n<\/div>\n\n

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The\nupdated IMF forecast also suggests the UK economy is set to grow more slowly\nthan previously anticipated, with this year\u2019s growth estimate cut to 4.7%.\nWhile this does represent a notable reduction from last October\u2019s 5.0%\nforecast, it still leaves the UK as the fastest growing economy among the G7\nindustrialised nations.<\/p>\n<\/div>\n\n

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Inflation at 30-year\nhigh<\/strong><\/p>\n<\/div>\n\n

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Official statistics\nreleased last month showed the UK headline rate of inflation now stands at its\nhighest level since March 1992, with survey data pointing to further cost\npressures in the pipeline.<\/strong><\/p>\n<\/div>\n\n

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The\nlatest ONS figures show that the Consumer Prices Index (CPI) 12-month rate \u2013\nwhich compares prices in the current month with the same period a year earlier\n\u2013 rose to 5.4% in December. This was 0.2% ahead of market expectations and a\nsizeable jump compared to the previous month\u2019s rate of 5.1%.<\/p>\n<\/div>\n\n

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Rising\nprices across the food, hospitality, household goods and clothing sectors were\nall key drivers of the increase, while fuel prices also remained at recent high\nlevels. With gas and electricity bills set for a further sharp hike in April,\nsome economists are now predicting that the CPI rate is likely to hit 7% by the\nspring.<\/p>\n<\/div>\n\n

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Two\nrecently released surveys also point to further inflationary pressures as firms\ncontinue to grapple with rapidly rising cost burdens. January\u2019s IHS Markit\/CIPS\nPMI report stated that cost pressures remain \u2018elevated at near-record levels<\/em>,\u2019\nwhile the Confederation of British Industry\u2019s Industrial Trends Survey for the\nquarter to January showed \u2018intense and escalating cost and price pressures\u2019<\/em>\nwith manufacturers reporting average costs growing at the quickest rate since\n1980.<\/p>\n<\/div>\n\n

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January\u2019s\ndata has intensified pressure on Bank of England (BoE) policymakers to raise interest\nrates again in a bid to dampen consumer demand and bring inflation back down\ntowards the Bank\u2019s 2% target. In December, the BoE became the first major\ncentral bank to raise rates since the onset of the pandemic when it announced a\n15-basis-point increase taking Bank Rate to 0.25%. A recent Reuters poll found\nmost economists expect a second hike to be sanctioned when the next meeting of\nthe Bank\u2019s Monetary Policy Committee concludes on 3 February. <\/p>\n<\/div>\n\n

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Markets <\/strong>(Data compiled by TOMD)<\/strong><\/strong><\/p>\n<\/div>\n\n

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At the end of January,\nmajor global markets largely closed in negative territory as investors\nmonitored developments between the Ukraine and Russia, and concerns over rising\ninterest rates weighed on sentiment.  <\/strong><\/strong><\/p>\n<\/div>\n\n

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In the UK, the FTSE 100 recorded its\nsecond consecutive monthly increase to end January up 1.08%,\nwhile the FTSE 250 and AIM both lost ground to close the month on 21,926.62 and\n1,094.97 respectively. Meanwhile, in Japan the Nikkei 225 ended the\nmonth on 27,001.98, down over 6%, and the Euro Stoxx 50 closed January down\n2.88% on 4,174.60.<\/p>\n<\/div>\n\n

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The prospect\nof higher US interest rates impacted markets towards month end, as the Fed\nsignalled that the cycle of rate hikes will commence in March. With\nUS inflation running at its highest level in\nalmost 40 years, and following a volatile month of trading, the Dow Jones closed January down 3.32%, while the NASDAQ closed down almost\n9%, its worst January since 2008.<\/p>\n<\/div>\n\n

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On the foreign exchanges, sterling closed the\nmonth at $1.34 against the US dollar. The euro closed at \u20ac1.19 against sterling\nand at $1.12 against the US dollar.<\/p>\n<\/div>\n\n

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The oil price continued its recent rise ahead of a key OPEC (Organization of the Petroleum Exporting Countries) meeting in early February. Supported by supply shortages and political tension in the Middle East and Eastern Europe, Brent Crude closed the month trading at around $88 a barrel, a gain of over 13%. Gold is trading at around $1,795 a troy ounce, a loss of around 0.59% on the month. <\/p>\n<\/div>\n\n

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Wages\nsqueezed by rising inflation<\/strong><\/p>\n<\/div>\n\n

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Although last month\u2019s\nbatch of labour market statistics revealed record job creation, the data also\nshowed pay growth is failing to keep up with the rising cost of living.<\/strong><\/p>\n<\/div>\n\n

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According\nto the latest figures released by ONS, the number of payrolled employees\ncontinues to grow strongly, with companies adding another 184,000 staff to\ntheir payrolls in December. The data also showed that unemployment remains on a\ndownward trend, with the headline rate falling to 4.1% in the three months to\nNovember, the lowest figure since June 2020.<\/p>\n<\/div>\n\n

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However,\ndespite this positive news, the data also revealed that pay is now being\nsqueezed by the rapid rise in inflation. While the latest figures did report\nrelatively strong levels of pay growth, wages were found to be rising less\nquickly than prices over the same period. As a result, real average weekly\nearnings fell by 1% in November, the first decline in inflation-adjusted pay\nsince July 2020.<\/p>\n<\/div>\n\n

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Responding\nto the data, the Resolution Foundation think tank said, \u2018Real wages\nofficially began to fall in November, and the current period of shrinking pay\npackets is likely to get worse before it starts to ease in the second half of\n2022.\u2019<\/em><\/p>\n<\/div>\n\n

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R<\/strong>etail sales fall sharply<\/strong><\/p>\n<\/div>\n\n

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T<\/strong>he latest retail\nsales statistics revealed a large decline in sales volumes during December due\nto this year\u2019s earlier Christmas shopping patterns and <\/strong>rising<\/strong> <\/strong>COVID<\/strong> <\/strong>cases<\/strong> deterring High Street visits<\/strong>.<\/strong><\/p>\n<\/div>\n\n

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ONS\ndata showed that total retail sales volumes fell by 3.7% in December,\nsignificantly weaker than analysts\u2019\nexpectations. This decline did, however, follow a particularly\nstrong set of figures in November as reports of potential shortages in the\nrun-up to Christmas encouraged consumers to do much of their\nfestive shopping earlier than usual.<\/p>\n<\/div>\n\n

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Commenting\non the data, ONS Statistician Heather Bovill said, \u201cAfter strong\npre-Christmas trading in November, retail sales fell across the board in\nDecember, with feedback from retailers suggesting Omicron impacted on footfall.\nHowever, despite the fall in December, retail sales are still stronger than\nbefore the pandemic.\u201d<\/em> <\/p>\n<\/div>\n\n

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Evidence\nfrom the latest CBI Distributive Trades Survey suggests sales remained below\nseasonal norms in January \u2013 almost a third of retailers described\nsales as poor for the time of year compared with under a tenth who said\nthey were strong, the worst reading on this\nmeasure\nsince March 2021. The CBI said it was not surprised sales were\nviewed as disappointing given the spread of Omicron, tighter\nrestrictions and increased consumer caution.<\/p>\n<\/div>\n\n

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It is important to take professional advice\nbefore making any decision relating to your personal finances. Information\nwithin this document is based on our current understanding and can be subject\nto change without notice and the accuracy and completeness of the information\ncannot be guaranteed. It does not provide individual tailored investment advice\nand is for guidance only. Some rules may vary in different parts of the UK. We\ncannot assume legal liability for<\/strong><\/p>\n<\/div>\n\n

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any errors or omissions it might contain.\nLevels and bases of, and reliefs from, taxation are those currently applying or\nproposed and are subject to change; their value depends on the individual\ncircumstances of the investor. No part of this document may be reproduced in\nany manner without prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Economy regains pre-pandemic size The UK economy grew strongly in November to move beyond its pre-COVID level with increasing momentum recorded across all industry sectors prior to the arrival of the Omicron variant. Data released by the Office for National Statistics (ONS) revealed that the economy grew by 0.9% in November. This was much stronger […]<\/p>\n","protected":false},"author":3,"featured_media":4350,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/4344"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=4344"}],"version-history":[{"count":1,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/4344\/revisions"}],"predecessor-version":[{"id":4349,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/4344\/revisions\/4349"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/4350"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=4344"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=4344"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=4344"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=4344"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}