LONDON - Britain's economy shrank by less than feared in December when the wave of Omicron COVID-19 cases prompted many people to work from home and avoid Christmas socialising, but analysts warned that surging inflation would slow the recovery in 2022.
Gross domestic product in December fell by 0.2% from November and was 6.0% higher than a year earlier, the Office for National Statistics said.
Economists polled by Reuters had forecast a 0.6% monthly fall for the world's fifth-biggest economy and for output to be 6.3% higher than a year earlier.
The economy grew by 1.0% for the fourth quarter as a whole, the same rate as the quarter before.
"Despite December's setback, GDP grew robustly across the fourth quarter as a whole with the NHS (National Health Service), couriers and employment agencies all helping to support the economy," ONS economist Darren Morgan said.
December GDP was in line with its level in February 2020, just before the pandemic struck, while output in the fourth quarter as a whole was slightly below that for the fourth quarter of 2019, the last full quarter before the pandemic.
November's GDP month-on-month growth rate was revised down to 0.7% from a previous estimate of 0.9%.
COVID-19 infections in Britain peaked around the turn of the year but have since fallen sharply, and the Bank of England forecast last week that output, measured on a quarterly basis, would recover to its pre-pandemic size by the end of March.
The BoE sees greater headwinds from fast-rising inflation, which it expects to peak at a 30-year high of around 7.25% in April when a 54% rise in regulated household energy tariffs takes effect.
"The UK economy is facing a materially weaker 2022 as the crippling burden of rising inflation, soaring energy bills and higher taxes on consumers and businesses dampens activity, despite a temporary boost from the lifting of Plan B restrictions," Suren Thiru, head of economics at the British Chambers of Commerce, said.
The central bank has raised interest rates twice since December - the first back-to-back rate increase since 2004 - and financial markets are pricing in rates of 1.75% by the end of this year.
Economic output in 2021 as a whole grew by 7.5%, the strongest since the ONS began its records in 1948 and the fastest since 1941, during World War Two, using data collected by the Bank of England.
Output fell by 9.4% in 2020, the biggest drop since 1919 when there was demobilisation after World War One.
(Reporting by David Milliken Editing by William Schomberg) ((firstname.lastname@example.org; +44 20 7513 4034;))