UK economy rises above pre-Covid levels despite failing to grow in February

The UK economic system has lastly risen above its pre-pandemic ranges, revised knowledge reveals, as prospects enhance that development beat official forecasts for the primary three months of 2023, regardless of flatlining in February.

Gross home product was unchanged between January and February, following a revised 0.4 per cent growth within the earlier month, the Workplace for Nationwide Statistics stated on Thursday.

February’s studying, which was closely impacted by strikes within the providers sector, was beneath the 0.1 per cent growth forecast in a Reuters ballot.

Nevertheless, due to revisions to knowledge on earlier months, the British economic system ended the month 0.3 per cent larger than it was in February 2020, earlier than the primary Covid-19 restrictions. In January 2023, the ONS estimated that the economic system was nonetheless 0.2 per cent beneath that degree.

The rise above pre-pandemic ranges was “an accomplishment that must be celebrated”, stated Ellie Henderson, economist at Investec, though it nonetheless compares poorly with different superior economies.

Within the final three months of 2022, the newest for which knowledge is offered, the US economic system was 5 per cent larger than it was within the remaining quarter of 2019, whereas eurozone output expanded by 2.4 per cent over the identical interval.

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Many analysts stated Thursday’s knowledge meant the economic system was unlikely to have contracted within the first quarter, as forecast by the Financial institution of England and the Workplace for Price range Duty. Only some weeks in the past, the fiscal watchdog stated British output would shrink by 0.4 per cent within the first three months of this 12 months.

Responding to the figures, chancellor Jeremy Hunt stated the financial outlook was “trying brighter than anticipated”, including: “We’re set to keep away from recession due to the steps we’ve taken by way of a large bundle of value of residing help for households and radical reforms to spice up the roles market and enterprise funding.”

Paul Dales, chief UK economist at analysis group Capital Economics, stated the possible avoidance of a recession within the first quarter boosted the possibilities of the BoE elevating rates of interest once more to damp demand and cut back inflation, now at 10.4 per cent, to its 2 per cent goal.

Markets are cut up between the central financial institution’s Financial Coverage Committee elevating its base charge by 0.25 share factors at its subsequent assembly on Might 11 or leaving charges at 4.25 per cent.

“The general sense is that the economic system continues to be proving resilient to the dual drags of excessive inflation and excessive rates of interest,” stated Dales.

The ONS stated that output within the providers sector dipped by 0.1 per cent in February, largely due to strikes in training and public administration. Output in training fell 1.7 per cent, whereas public administration registered a 1.1 per cent drop.

Unseasonably gentle climate in contrast with January led to falls in using electrical energy and gasoline, whereas the development sector grew by 2.4 per cent.

Output in consumer-facing providers, similar to eating places, retailers and hairdressers, additionally posted a 0.4 per cent growth.

Yael Selfin, chief economist on the consultancy KPMG UK, stated that, whereas the UK economic system was “prone to escape recession” this 12 months, the medium-term outlook remained “comparatively weak by historic requirements”.

Martin Beck, chief financial adviser to the consultancy EY Merchandise Membership, predicted that the financial restoration would “achieve traction” within the second half of 2023, boosted by “falling family vitality payments and the influence of the fiscal loosening introduced within the Price range”.

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