Rising Costs Set to Stall Growth in Second Quarter

Main points

• February’s growth underperformed expectations at 0.1 per cent, despite positive contributions from the hospitality, travel agency and recreation sectors, which continued to normalise after Covid-19. Our final forecast for the first quarter of 2022 is for growth of 1.0 per cent.
• The 3.8 per cent month-on-month decline in healthcare output reflects a reduction in Covid-related activity. Falls in retail and manufacturing, on the other hand, may reflect the rising cost of consumer and producer goods even before the war in Ukraine began.
• Our initial nowcast for the second quarter of 2022 is for GDP unchanged from the first quarter, with a small quarter-on-quarter fall in production and a small rise in construction.

“The normalisation of the economy after Covid continued in February, with monthly GDP now 1.5 per cent above its pre-pandemic level.  Although the 0.1 per cent growth in February was significantly slower than January, we saw rapid growth in tourism-related sectors like hotels and travel agencies, offset by reductions in Covid-related healthcare activity and construction, which was affected by Storms Dudley, Eunice and Franklin.” 

Rory Macqueen
Principal Economist, NIESR

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