UK economy rises above pre-Covid levels despite failing to grow in February
The UK financial system has lastly risen above its pre-pandemic ranges, revised knowledge reveals, as prospects improve that progress 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 affected by strikes within the providers sector, was beneath the 0.1 per cent growth forecast in a Reuters ballot.
Nonetheless, because of revisions to knowledge from earlier months, the UK financial system ended the month 0.3 per cent greater than in February 2020, earlier than the primary Covid-19 restrictions have been launched. In January 2023, the ONS estimated that the financial system was nonetheless 0.2 per cent beneath that stage.
The rise above pre-pandemic ranges was “an accomplishment that needs to 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 most recent for which knowledge is on the market, the US financial system was 5 per cent greater than it was within the closing quarter of 2019, whereas eurozone output expanded by 2.4 per cent over the identical interval.
Many analysts stated Thursday’s knowledge meant the financial system was unlikely to have contracted within the first quarter, as forecast by the Financial institution of England and the Workplace for Funds Accountability. Just a few weeks in the past, the fiscal watchdog stated British output would shrink 0.4 per cent within the first three months of this 12 months.
Responding to the figures, UK chancellor Jeremy Hunt stated the financial outlook was “wanting brighter than anticipated”, including: “We’re set to keep away from recession because of the steps we have now taken by an enormous package deal of value of dwelling 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 doubtless avoidance of a recession within the first quarter boosted the probabilities of the BoE elevating rates of interest once more to damp demand and scale back inflation, now at 10.4 per cent, to its 2 per cent goal.
Markets are break up between the central financial institution’s Financial Coverage Committee elevating the bottom charge by 0.25 share factors at its subsequent assembly on Might 11 or leaving it at 4.25 per cent.
“The general sense is that the financial 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 0.1 per cent in February, largely due to strikes in schooling and public administration. Output in schooling 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 the usage of electrical energy and fuel, whereas the development sector grew 2.4 per cent.
Output in consumer-facing providers, reminiscent of 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 financial 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 “acquire traction” within the second half of 2023, boosted by “falling family power payments and the influence of the fiscal loosening introduced within the Funds”.