UK economy grows faster than expected; oil prices drop as US considers big oil reserve release – business live | Business

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Britain’s economy grew at a faster clip than previously thought in the last three months of 2021 when the country was hit by the Omicron wave.

GDP in the world’s fifth-biggest economy rose by 1.3% in the fourth quarter from the previous three months, the Office for National Statistics said, stronger than a preliminary estimate of growth of 1.0%.

The ONS said the biggest contributors to the increase were from human health and social work activities, driven by increased GP visits at the start of the quarter, and a large increase in coronavirus testing and tracing activities, and the extension of the vaccination programme.

However, consumer spending growth was revised lower from 1.2% to 0.5%. Some economists said it looks as though the upward revision was driven by higher inventories, which is not a sustainable source of growth.

Paul Dales, senior UK economist at Capital Economics, said:

The upward revision to GDP growth in Q4 of last year may not be as encouraging as it looks as a lot of it appears to be due to inventories while consumer spending was revised down. The latter suggests the squeeze on real incomes is starting to bite, although the fall in the saving rate is providing a cushion.

Overall, the data leave the economy just 0.1% smaller than the Q4 2019 pre-pandemic level. The 9.4% drop in GDP in 2020 was revised to a smaller 9.3% fall, while the 7.5% rise in GDP in 2021 was revised down to a 7.4% increase. GDP growth will probably be around 4.0% this year, if not a bit weaker, said Dales.

Oil prices have fallen as much as $5 a barrel this morning on news that the United States is considering the release of up to 180 million barrels from its strategic petroleum reserve, which would be the biggest ever, Reuters reported.

Brent crude is now trading $4 lower at $109.44 a barrel, while US light crude is at $103.28 a barrel.

Activity in Chinese manufacturing and services simultaneously contracted in March for the first time since the start of the Covid-19 pandemic in 2020adding to the urgency for more policy intervention to stabilise the economy. Chinese authorities have already indicated they will step in with more support measures.

The official manufacturing Purchasing Managers’ Index fell to 49.5 from 50.2 in February, China’s National Bureau of Statistics said, while the non-manufacturing PMI eased to 48.4 from 51.6 in February.

Asian stocks fell after the data. Japan’s Nikkei closed down 0.7% while Hong Kong’s Hang Seng dropped 1% and the Shanghai composite index lost 0.45%.

European shares have opened higher after yesterday’s declines. The FTSE 100 index is 0.2% higher at 7,594 while Germany’s Dax rose 0.6% and France’s CAC advanced 0.3%.

Inflation in France has climbed to 4.5% in Marchfrom 3.6% in February, because of higher energy, food and services prices, the French statistics office said.

The Agenda

• 8.55am BST: Germany unemployment for March (forecast: -20,000)
• 10am BST: Eurozone unemployment rate for February (forecast: 6.7%)
• 10am BST:: Italy inflation for March (preliminary) (forecast: 6.4%)
• 1.30pm BST: US PCE price index for February