Stocks received a lift heading into the weekend with the release of official figures showing the UK economy performed much better than expected in November.

On a monthly basis, GDP (gross domestic product) is estimated to have grown by 0.9% in November against forecasts of a 0.4% increase, taking it above its February 2020 pre-pandemic level for the first time.

Growth was broad-based, with industrial production rising 1%, construction output rising 3.5% and the all-important services component rising 0.7% during the month.

Services represent close to 80% of the UK economy and include business to business companies as well as shops, restaurants, pubs and hotels and entertainment venues.

Growth in consumer-facing services was 0.8%, boosted by a 1.4% increase in retail trade which benefited from Black Friday events. Even so, consumer-facing services are still 5% below their pre-Covid levels while business services are 2.9% above early 2020 levels.

Another positive factor behind the November growth figure is the fact the Omicron variant only surfaced very late in the month and had little impact on economic activity.

That does suggest, however, that December’s GDP figure is likely to disappoint, so any worries that the Bank of England may bring forward its next rate rise on the back of November’s figure have been alleviated.

Investors certainly looked on the bright side, lifting shares in domestic facing companies like water services providers Severn Trent (SVT) and United Utilities (UU.) and electricity distributor National Grid (NG.).

Martin Beck, chief economic advisor to the economic forecasting group EY ITEM Club, believes the impact from Omicron on the economy 'is likely to be much smaller than previous Covid waves and the economy will bounce back quickly' with GDP rising 'convincingly' back above November's level by early spring.

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Issue Date: 14 Jan 2022