UK economy grew by 0.1% in February

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The UK economy grew for the second month in a row in February, pushed by enlargement in manufacturing, elevating hopes the UK is rising from a technical recession.

Gross home product rose 0.1 per cent between January and February, the Office for National Statistics mentioned on Friday.

That was in line with analysts’ expectations and down from January’s 0.3 per cent revised month-to-month development.

Services output grew 0.1 per cent in February, whereas manufacturing — which incorporates manufacturing, utilities and mining — elevated 1.1 per cent. Construction output fell 1.9 per cent.

Sterling barely moved on the information; it was down 0.15 per cent towards the greenback at $1.2526 shortly after the announcement.

February’s determine raises the probability that the UK economy expanded total in the primary quarter, marking the tip of the technical recession it slipped into on the finish of 2023 after two consecutive quarters of unfavourable development.

“GDP would need to fall by an unlikely 1 per cent month on month or more in March for the economy to contract in the first quarter as a whole,” mentioned Paul Dales, chief UK economist at Capital Economics.

“As a result, we can safely say that, after lasting just two quarters . . . the recession ended in Q4,” he added.

A small improve in March GDP would outcome in a 0.4 per cent enlargement in the primary three months, which could possibly be stronger than the 0.1 per cent forecast by the Bank of England, in keeping with Dales.

Rob Wood, economist on the consultancy Pantheon Macroeconomics predicted that the BoE would begin chopping rates of interest from their 16-year excessive of 5.25 per cent from June, “but stronger than expected growth means the Monetary Policy Committee is lacking a clear trigger to act quickly”.

Line chart of Real GDP, rebased 2019=100 showing The UK economy grew 0.1 per cent in February

The newest determine can be a lift for UK Prime Minister Rishi Sunak, who has pledged to develop the economy as he heads right into a normal election anticipated this 12 months.

The Conservative occasion trails Labour by roughly 20 factors in opinion polls.

In the three months to February, the economy grew 0.2 per cent in contrast with the earlier three months, marking the primary enlargement since August 2023.

Jeremy Hunt, chancellor, mentioned the figures had been “a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan”.

Hunt is hoping that development information revealed in May will present that Britain has moved out of the gentle recession, eradicating a political weight from the Conservatives forward of the election.

Column chart of Contributions to monthly GDP growth, % points showing Production and services helped the economy expand in February

Many economists count on the economy to enhance as wages rise quicker than inflation and mortgage charges fall from final 12 months’s peak.

But whereas development is returning to the UK economy and inflation is anticipated to quickly fall under the BoE’s 2 per cent goal, there are clouds on the horizon for the chancellor.

Market expectations for BoE rate of interest cuts in 2024 have retreated, pushing again the prospect of the beginning of a rate-cutting cycle that Hunt believes will shift public sentiment on the economy.

Despite the 2 consecutive month-to-month will increase, output was nonetheless 0.2 per cent under its degree in February final 12 months. Output in consumer-facing providers, similar to eating places, retailers and hairdressers, fell 0.1 per cent in February and was 5.7 per cent under its February 2020 degree, earlier than the pandemic, revealing the affect of the price of dwelling disaster.

Rachel Reeves, shadow chancellor, mentioned the Conservatives “cannot fix the economy because they are the reason it is broken”.

“After 14 years of Conservative economic failure, Britain is worse off with low growth and high taxes,” she added.

The ONS mentioned development was widespread throughout the manufacturing sector with an enlargement reported in 11 of the 13 subsectors, with robust development in automobile and meals manufacturing.

Services output additionally grew, with public transport and haulage, and telecommunications performing strongly, offsetting falls in the well being sector.

In distinction, building output was hit by moist climate and fell.

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