The UK economy is crawling away from recession but only “at a snail’s pace”, with GDP rising by just 0.1% in February, official figures show today.
The meagre growth, not helped by torrential rain that hammered the construction sector, marks a slowdown from a 0.3% advance in January, which was revised up today from 0.2% by the Office for National Statistics (ONS).
However, it still makes it almost certain that GDP went up over the first quarter of the year as a whole, although that will not be officially confirmed until the March figure is out on May 10. It would mean the two-quarter “technical” recession seen in the second half of last year probably ended in December, making it one of the shortest such downturns in British economic history.
A recession is defined as two consecutive quarters of contraction, and the UK achieved this in the third and fourth quarters of 2023 when GDP fell by 0.1% and 0.3% respectively. Although the likely end of the recession cheered the markets — with the FTSE 100 roaring past the 8,000 mark — City commentators said the UK remained stuck in the growth slow lane.
Ed Monk, associate director of Fidelity International, said: “Last year’s recession appears to have been both shallow and short-lived, but the fact remains that UK growth remains weak. We may be shaking off the technical recession but that won’t change the feeling that there is very little momentum in the economy.”
Paul Dales of Capital Economics said: “GDP would need to fall by an unlikely 1.0% m/m or more in March for the economy to contract in Q1 as a whole. As a result, we can safely say that, after lasting just two quarters and involving a total fall in GDP of just 0.4% or so, the recession ended in Q4.”
Today’s figures were in line with City forecasts. They show the dominant services sector, which accounts for around 80% of output, grew by 0.1%, while the production sector, which includes manufacturing, advanced 1.1%.
However, the construction sector took a 1.9% tumble, the biggest drop in a month since January last year. The ONS said anecdotal evidence suggested “negative effects of heavy rainfall delaying planned work.”
It was the fourth-wettest February in England, with the southern half of the country seeing more than twice average rainfall.
But ONS chief economist Grant Fitzner said he was “moderately optimistic” about the outlook for the next few months, with the labour market stable, consumer confidence rising, and businesses more hopeful about pros pects for turnover.
However, much will depend on the timing of interest rate cuts from the Bank of England. Today, City markets were predicting only a 9% chance of a cut at the May meeting of the Monetary Policy Committee, rising to 40% by June, and 65% by August.
Victoria Clarke, UK chief economist at Santander CIB, said: “The February GDP looks like a perfect ‘not too hot, not too cold’ number for the Bank of England.”
