People shelter from the rain under a Union flag umbrella as they walk past blooming spring flowers in St. James’s Park in central London on April 10, 2024.
Justin Tallis | Afp | Getty Images
LONDON – The United Kingdom’s gross domestic product rose 0.1% in February, the Office for National Statistics said on Friday, in another sign of a return to sluggish economic growth this year.
The monthly figure was in line with a forecast in a Reuters poll. On an annual basis, GDP was 0.2% lower.
The economy contracted in the third and fourth quarters of 2023, putting the UK into a technical recession.
January saw slight growth, which was revised upwards to 0.3% on Friday.
Construction production, which boosted growth at the start of the year, fell 1.9% in February. Instead, manufacturing output was the biggest contributor to GDP, rising 1.1% in February, while growth in Britain’s main services sector slowed to 0.1% from 0.3%.
The figures “all but confirm that last year’s recession has ended,” Paul Dales, chief U.K. economist at Capital Economics, said in a note.
“While we expect a better economic recovery than most, we doubt it will be strong enough to prevent a further decline in inflation (and interest rates), as appears to be the case in the US,” Dales added added.
British inflation fell more than expected in March to a nearly two-and-a-half-year low of 3.4%.
However, in the US, price increases this week came in higher than forecast at 3.5%, pushing back market bets that interest rate cuts will begin from summer to September.
That has raised questions about whether central banks elsewhere will be influenced by a later-than-previously expected start by the Federal Reserve, particularly if the U.S. dollar strengthens.
Goldman Sachs on Friday revised its forecast for Bank of England interest rate cuts this year from five to four, and expects rate cuts to begin in June and then slow to a quarterly pace.
Simon French, chief economist at Panmure Gordon, told CNBC’s “Squawk Box Europe” on Friday that while the BOE is independent, policymakers are aware of the upcoming national election in the United Kingdom, which politicians in would take place in the second half of the year.
“Receive [cuts] out of the way before the general elections? There is quite a bit of pressure from the ruling party, not necessarily the Prime Minister, but the Chancellor, who has spoken about expecting interest rate cuts.”
Overall, French said the numbers strongly point to the end of the recession but are “no reason to put the flag out.”
Growth is below pre-pandemic trends and lags that of the U.S., but is on par with much of Europe and shows signs of recovery in areas such as manufacturing and auto production, French added.
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2024-04-12 08:10:49
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