British economic growth point will emerge from recession

 

Britain's tepid economy is on the verge of emerging from a shallow recession, official data showed on Friday, with output growing for a second consecutive month in February and January's data revised upward. Gross domestic product rose 0.1% month-on-month in February, in line with expectations in a Reuters poll of economists. The Office for National Statistics (ONS) said January's data was revised to growth of 0.3%, up from 0.2% previously. Data confirmed the UK economy was on a stronger footing to start 2024, with three-month average growth rising to 0.2% in February from zero in January, the highest reading since August. These data may also reinforce the Bank of England's cautious attitude towards the prospect of interest rate cuts, with the economy expected to slightly exceed the Bank's first quarter expansion forecast of 0.1%.

Business surveys showed continued growth in March. The Office for National Statistics said the UK would now be out of recession even if GDP contracted sharply by around 1% in March - assuming there were no revisions to data from previous months. Despite the temporary recovery, GDP remains below levels in June 2023, before the latest recession, and has remained broadly stable since early 2022.

Economic analysis shows that although concerns about an economic recession are disappearing, the long-term outlook remains difficult, and the lagging impact of early interest rate hikes and long-term supply-side constraints may continue to limit the UK's growth potential. Economic output was down 0.2% from February 2023 levels, slightly better than the 0.4% gap forecast by economists. The services sector, which dominates the economy, grew 0.1% monthly in February, in line with expectations. But manufacturing output rose 1.2% this month, beating expectations. Construction fell 1.9%, its biggest drop in more than a year.