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 information exhibits, 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 enlargement 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 under the 0.1 per cent enlargement forecast in a Reuters ballot.

Nonetheless, due to revisions to information from earlier months, the UK economic system ended the month 0.3 per cent larger than in February 2020, earlier than the primary Covid-19 restrictions had been launched. In January 2023, the ONS estimated that the economic system was nonetheless 0.2 per cent under 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 most recent for which information is accessible, 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 information 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 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 yr.

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 due to the steps we now have taken by way of a large package deal of value of dwelling assist 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 possibilities 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 its base price by 0.25 proportion factors at its subsequent assembly on Could 11 or leaving charges at 4.25 per cent.

“The general sense is that the economic system remains 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 delicate climate in contrast with January led to falls in using electrical energy and fuel, whereas the development sector grew 2.4 per cent.

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

Yael Selfin, chief economist on the consultancy KPMG UK, stated that, whereas the UK economic system was “more likely to escape recession” this yr, 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 impression of the fiscal loosening introduced within the Price range”.

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