ONS: The economy grew slightly in February
Here’s ONS director of economic statistics Liz McKeown on the news that the UK economy grew by 0.1% in February:
“The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little with public transport and haulage, and telecommunications having strong months.
“Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.
“Looking across the last three months as a whole, the economy grew for the first time since last summer.”
Key events
Full story: UK takes another step on path to exit recession
Richard Partington
Britain’s economy has taken a step closer to exiting recession after official figures showed growth continued in February despite a washout month for retailers after one of the wettest starts to a year on record.
Here’s the full story:
The UK economy is putting further distance from last year’s recession, says Jeremy Batstone-Carr, European strategist at Raymond James Investment Services
“Data released this morning by the ONS shows that UK GDP expanded by 0.1% in February. This signals a further move away from the shallow economic contraction experienced over the second half of 2023.
“More evidence supports this revival. Service sector output delivered a second consecutive month of expansion, which, paired with upbeat retail sales and forward-looking business surveys, point to strengthened activity in March. Industrial output remains below pre-pandemic levels, and gas and electricity output were subdued by mild weather. But a broad revival is nonetheless underway, as part of an improving global outlook.
“Today’s data indicates that the UK’s economic trajectory is on a shallow but steady upward course. The measures introduced in the March Budget will further enhance prospects in the short term. However, decelerating inflation paves the way for the Bank of England to commence its rate cutting process in the coming months, a decision which should also prove supportive to the growth outlook.”
UK GDP: the details
Britain’s industrial sector was the largest contributor to growth in February.
Today’s GDP report shows that production output grew by 1.1% in February, more than reversing a 0.3% drop in January.
Manufacturing output rose by 1.2%, driven by a surge in manufacturing of transport equipment such as cars.
The services sector had a calmer month – it grew by 0.1% in February, slower than the 0.3% growth in January.
And it was a month to forget for builders, with construction output falling by 1.9% in February.
The ONS cites “anecdotal evidence” that heavy rainfall delayed planned work and decreasing output in February.
ONS: The economy grew slightly in February
Here’s ONS director of economic statistics Liz McKeown on the news that the UK economy grew by 0.1% in February:
“The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little with public transport and haulage, and telecommunications having strong months.
“Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.
“Looking across the last three months as a whole, the economy grew for the first time since last summer.”
UK economy grew by 0.1% in February
Newsflash: the UK continued to grow in February, boosting hopes that the economy is escaping recession.
GDP expanded by 0.1% in February, new data from the Office for National Statistics shows, lifted by growth in the production and services sectors.
And the ONS has lifted its forecast for January, to show 0.3% growth, up from 0.2% previously estimated.
This suggests the economy may manage to grow in the first quarter of 2024. And that would mean the short, shallow recession that began at the end of 2023 will officially end.
Half of consumers ‘cut back on non-essential spending’
Even if the economy is growing again, households are still struggling.
Half of consumers have cut back on their non-essential spending so far this year, with eating out the most likely cull from budgets, a survey this morning shows.
Just 3% of consumers say that they have been able to spend more on non-essentials in the first quarter, with 52% cutting back, according to the KPMG Consumer Pulse survey.
Eating out was the most common discretionary spending cut, listed by 72% of those who are scaling back, followed by clothing purchases (62%) and takeaways (58%).
Sanjay Raja, Deutsche Bank’s chief UK economist, predicts wet weather and lower energy production will mean UK growth slower in February, to 0.1%.
But he also believes the economy is at a ‘turning point’ after last year’s shallow recession.
Raja explains:
After matching our estimates in January, we expect GDP growth to slow to 0.1% m-o-m in February 2024 (Jan-24: 0.2% m-o-m). What’s driving the slowdown? Wetter weather and lower oil/energy production will, we think, keep GDP from budging very much. Overall, we see services activity and industrial production up 0.1% m-o-m, respectively, with construction output flat on the month.
Looking ahead, we think the UK economy is at a turning point following on from its short and shallow recession last year. We see GDP picking up by 0.2% q-o-q in Q1-24, and pushing to 0.3% – 0.4% q-o-q for the remainder of the year. For 2024 as a whole, we see GDP up 0.5%, rising by 1.5% next year.
Introduction: UK GDP report in focus
Good morning.
We’re about to learn whether the UK is climbing out of the recession into which it slipped at the end of last year.
At 7am, the Office for National Statistics will release its first estimate for UK GDP in February, and the City are hoping to see signs of growth.
Economists predict that GDP rose by 0.1% in February; a weak expansion, following 0.2% growth in January. That would raise the chances that the economy grew in the first quarter of 2024 – which would end the recession.
Reminder: The UK ended 2023 in a technical recession, after shrinking slightly in both the third and fourth quarters of last year.
To escape recession, it needs to not shrink in January-March (and that data is due in a month’s time).
Bad weather may have weighed on UK growth this year, though. We already know that retail sales growth slowed during a wet February, when storms kept people at home.
Any signs that the downturn is over would be welcomed by the government, with a general election close.
But the financial markets are not being very kind to Rishi Sunak this week. The PM’s hopes that the public might see lower taxes and cheaper mortgages soon have weakened, as traders scaled back expectations of interest rate cuts in 2024 yesterday.
The City now expects just two quarter-point cuts to UK interest rates in 2024, which would lower rates by half a percentage point to 4.75% by December.
Today’s GDP report may not change the outlook for rate cuts, explains Danni Hewson, head of financial analysis at AJ Bell:
UK GDP figures are expected to be tepid, not too hot or too cold, and unlikely to do much to change thinking at the Bank of England.
“Where just a few months ago markets were betting rates here in the UK could fall below 4% by Christmas now only two cuts are being priced in. The sands are shifting and investors are having to be fleet of foot.”
The agenda
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7am BST: UK GDP report for February
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Noon BST: Bank of England to publish review of its forecasting models
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1pm BST: India’s inflation rate for March
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3pm BST: University of Michigan’s index of US consumer confidence
