about 2 years ago • 3 mins
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.
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Volvo posted its highest yearly revenue ever on Friday, even as other carmakers struggled with shortages. So what’s the Swede’s secret?
What does this mean?
Volvo wasn’t about to let supply issues spoil its quintessentially upbeat Nordic mood last quarter, even if the company did sell 20% fewer cars and bring in 6% less revenue than the same time in 2020. The company is, after all, a poster child for adapting to survive: it brought in 7% more revenue in 2021 than the year before, and it sold 6% more cars too – many of which were its more expensive, more profitable models. Here’s hoping even higher prices don’t hamstring its fortunes this year: the carmaker said it’ll probably have to raise them on the back of higher raw materials costs.
Why should I care?
Zooming in: The clock is ticking.
6% of all the cars Volvo sold last quarter were battery electric vehicles (EVs), but that’s still – *does the math* – 94% less than its goal of exclusively selling EVs by 2030. So no more playing around: the company announced earlier this month that it’d be investing $1 billion in updating its Swedish manufacturing plant, as well as a joint $3 billion with battery-maker Northvolt to design and manufacture cheaper, more efficient batteries.
Zooming out: Lot of lithium stans out there.
Volvo isn’t the only carmaker going hard on EVs, and all that extra demand is sending prices of battery materials soaring. Take lithium carbonate, whose price was 569% higher last month than it was in January 2020. And since it can take as long as 10 years to open a new mine and boost supply, it could climb for a long time yet. So if carmakers don’t want EVs to become totally unaffordable, partnerships like the Volvo-Northvolt deal could be essential to finding new materials to use, along with new ways to use fewer of them.
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