London, (Parliament Politics Magazine) – In January, the UK GDP rose by 0.8%; was it a promising start of 2022 or a one-off? Towards the end of the month, the release from Omicron-related restriction boosted the economy. British consumers were out spending again, but it was the end of the month; therefore, their activities will be reflected in February’s results. On the other hand, wholesale and retail sales increased 2.5% compared to December. Is this growth sustainable?
The rise in the cost of living has already started. It doesn’t take a Master’s in economics to notice that prices at the supermarkets have gone up. The cost of energy is rising. The phrase “heat or eat” has almost become too widespread to be noticed, but it is an indication of a dilemma that many people are afraid they will have to face sooner or later. In the same way that the customs duties on European food imports made some products more expensive, products that we expect in our supermarkets, the war in Ukraine made soaring energy prices rise even faster.
The war and the Western sanctions on Russia may be crippling the Russian economy, but they also have an impact on the West. Many predict a rise in the price of wheat because Russia and Ukraine are responsible for 30% of the world’s output. The war has already led to a rise in the price of many commodities, a rise that may not immediately affect retail prices but may impact them a few months from now.
Airfreight between Europe and Asia has been disrupted by the closure of Russian airspace in retaliation to countries that have banned Russian planes from entering their airspace. This has disrupted trade routes and may create some supply chain issues. Nothing major but enough to prompt a price increase of some items, an increase that would hardly be noticed except it comes at a time when articles about the rise in the cost of living have become a staple of British media.
Is it all doom and gloom? Well, not really. Travel and hospitality will benefit from the relaxation of COVID-containment measures. The shift to a hybrid working lifestyle, some days at the office, some days working from home, will also improve retail sales in the high street.
It is all down to the British consumer if Brits go out, have a good time with friends, and on their way back to their car see something they like in a shop and buy it, January’s trend may not be a one-off; on the other hand, if the rise in the cost of living is matched by a drop in consumer spending, January’s figure might be wishful thinking for the rest of the year.