GDP Gathered Momentum Before Omicron

We expect above-target inflation to weigh on demand, offsetting much of the nominal wage gains experienced by those in work. We now forecast GDP to grow by 1.2 per cent in the fourth quarter of 2021 and by 0.6 per cent in the first quarter of 2022.

Pub. Date
14 January, 2022
Pub. Type

Main points

  • Rapid and broad-based growth in November sees our forecast for the fourth quarter of 2021 revised up to 1.2 per cent. Our first estimate for the first quarter of 2022 is 0.6 per cent.
  • November’s stronger than expected reading took output above its pre-Covid level, though still around 2½-4 per cent below its 2015-2019 trend.
  • Supply constraints do not appear to have been holding back manufacturing and construction, which saw their strongest growth rates in 8 months before the onset of the omicron variant.

“November 2021’s growth in GDP was broad-based, with output increasing almost across the board and transport and education among those returning to their pre-Covid output levels. Omicron is likely to have caused a significant slowing in growth in December, but the November data show little sign of headwinds from supply shortages: manufacturing and construction both enjoyed their strongest month-on-month growth since March 2021.”

Rory Macqueen

Principal Economist - Macroeconomic Modelling and Forecasting