LONDON (Reuters) – Britain’s economy barely grew in October, before the emergence of the new Omicron variant of the coronavirus, further denting expectations that the Bank of England will raise interest rates next week for the first time since the pandemic struck.
Gross domestic product edged up by a weaker-than-expected 0.1% in October.
That meant the economy remained 0.5% smaller than it was in February 2020, just before the country went into its first COVID-19 lockdown, the Office for National Statistics said on Friday.
Economists polled by Reuters had forecast monthly gross domestic product growth of 0.4% from September.
“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,” Alpesh Paleja, lead economist at the Confederation of British Industry, said.
“We need to create consistency in our approach and build confidence by reducing the oscillation between normal life and restrictions as we learn to live with the virus and its variants.”
Sterling dipped after the ONS figures were published as investors took them as another sign that a BoE rate hike on Dec. 16, after its December meeting, was unlikely.
Britain’s economy bounced back strongly earlier this year from its nearly 10% slump in 2020 when the pandemic hit.
But the rebound slowed in recent months as supply chain problems hit manufacturers and it is expected to lose more momentum due to new COVID-19 rules to slow the spread of the Omicron variant of the coronavirus.
October’s growth was helped by a continued rise in face-to-face appointments at doctors’ surgeries in England which had fallen sharply during the coronavirus pandemic, contributing to a 0.4% rise in output in Britain’s dominant services sector.
By contrast, industrial output fell 0.6%, hit by big falls in electricity and gas and in mining and quarrying.
The manufacturing sector flat-lined as the sector struggled with supply chain problems and staff shortages.
Construction fell by the most since April 2020, down by 1.8% from September, also hit by a shortage of supplies.
Separately, the ONS released trade data which showed Britain’s goods trade deficit narrowed to 13.9 billion pounds in October from 14.7 billion pounds in September.
(Writing by William Schomberg and Andy Bruce)