What's going on?
Britain might’ve lost a few battles last year, but it’s finally won the war: data out on Friday showed the UK economy grew at its fastest since 1941 last year.
What does this mean?
First, let’s address the Omicron in the room: Britain’s economy was 0.2% smaller in December than the month before, as workers stopped working, shoppers stopped shopping, and merrymakers stopped making merry. Thing is, economists were expecting the economy to shrink by three times as much as that, potentially having misjudged just how effective the booster rollout in the country really was. That means the economy still managed to grow 1% last quarter versus the same time the year before, leaving it just 0.4% below pre-pandemic levels. And that helped it grow by 7.5% in 2021 overall – a spit in the eye of the 9.4% contraction it suffered in 2020, and making Britain the fastest-growing advanced economy of 2021.
Why should I care?
The bigger picture: Consider this a one-off.
The UK might want to enjoy this while it lasts: the Bank of England thinks economic growth is now at serious risk from rising prices, which will keep squeezing household finances even when Omicron stops causing trouble. Throw in the tax hikes the UK government has planned, and KPMG economists are forecasting this year’s growth will sit at “just” 3.7%.
Zooming out: Keep saving for that house.
The UK housing market had a hand in this growth, and it’s still going strong: British bank Halifax just revealed that the average British house price hit a record £277,000 ($376,000) in January – up 0.3% from December. Still, that was the smallest monthly increase since June last year, which suggests would-be homebuyers are starting to get cold feet. Halifax certainly thinks so: it said it’s expecting house price growth to slow to a crawl this year.