UK economy g GDP February, beating economists’ expectations
Millennium Wheel and Landscape at Sunset. London, England.
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The UK economy grew by 0.5% in February, according to preliminary figures published by the Office for National Statistics on Thursday.
Economists polled by Reuters had expected Britain’s gross domestic product (GDP) to rise by 0.1% monthly.
In February, services and production increased by 0.5% and construction increased by 1%.
This recovery comes after the economy grew by 0.1% in January (the ONS’s initial forecast suggested the economy had plateaued).
Although the data for February were much better than expected, analysts said they would largely be viewed as retrospective data given the events that occurred in the Middle East when the United States and Iran launched military operations against Iran on February 28.
The International Monetary Fund warned earlier this week that Britain could see the biggest hit to growth from the Iran war of any major economy.
The IMF predicts that Britain’s growth in 2026 will be just 0.8 percent, below the previous forecast of 1.3 percent. IMF’s statement in January
“Looking ahead, we expect growth to accelerate,” Sanjay Raja, Deutsche Bank’s chief UK economist, said in an emailed analysis.
“In fact, higher uncertainty will weaken spending and investment. Tighter financial conditions will not help either. We expect output to take a hit along with weakening sentiment,” he added.
As a net energy importer, the UK is particularly vulnerable to global energy price shocks caused by conflicts in the Middle East, which hinder oil and gas exports from the region.
Before the war began in late February, the Bank of England was expected to cut interest rates as inflation cooled towards its 2% target. However, the war fulfilled these expectations.
Economists expect UK inflation to rise to 3.3% in March from 3% in February, forcing the bank to raise interest rates at least once this year. The latest inflation data will be announced on April 22.
Patrick O’Donnell, chief investment strategist at Omnis Investments, said February GDP data was likely to have minimal impact on the thinking of Bank of England policymakers when they next meet at the end of the month.
“With uncertainty high and multiple cross-currents, we expect the BoE to stand on its own. Looking beyond April, the market is split between 25 basis point and 50 basis point hikes by the end of the year. With the BOE still viewing bank rates in restrictive territory, we think they are more likely to remain on hold at the moment.”
