The UK economy unexpectedly came to a halt in February as strikes crippled public services but was still likely to perform better than expected by the Bank of England.
(Bloomberg) — The UK economy unexpectedly stalled in February as strikes crippled public services but is still likely to perform better than expected by the Bank of England. .
Gross domestic product was unchanged from January instead of posting the 0.1% growth analysts expected, the Office for National Statistics said on Thursday. January’s figure was revised up to 0.4%.
Together, the readings put output in the UK above pre-pandemic levels and suggest the economy is unlikely to contract in the first quarter. That further reduces the risk of a recession but puts the UK on track for a prolonged period of stagnation.
Yael Selfin, chief economist at KPMG UK, said: “The combination of an upward revision to GDP data and an improvement in global economic conditions could help the UK economy avoid a recession for the year. now”. “While this should provide some relief to policymakers, the medium-term growth outlook remains relatively weak by historical standards.”
Households will continue to be impacted by higher prices and the impact of the Bank of England’s string of 11 rate hikes, she said.
Assuming no revisions, the economy could grow 0.1% in the first quarter unless March’s numbers show a contraction of more than 0.2%, the ONS said. According to the Bank of England forecast, a decline of 0.6% will be needed for GDP to shrink by 0.1% in the quarter.
Exchequer Chancellor Jeremy Hunt said avoiding a recession – largely the result of lower-than-expected energy prices – was a victory for Conservative policy.
“The economic outlook looks brighter than expected,” Hunt said in a statement. “We are poised to avoid a recession thanks to the steps we have taken through a massive cost-of-living package for families and radical reforms that boost the job and investment markets. business private.
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The weak February data reflects the impact of widespread industrial activity for the month. Service output fell 0.1% as teachers and civil servants quit. The manufacturing sector, which economists once thought would post small growth, was also unchanged for the month.
Strike action increased during the month, with teachers in England staging a nationwide strike on 1 February to settle a pay dispute and regional strikes on other days. Other actions involve railway workers, university employees, nurses, medical staff and civil servants.
February was also unusually warm, reducing output from utilities.
Public administration was the second largest contributor, down 1.1% in February 2023. The sector also saw industrial activity take place in civil service in February 2023.
This decline was partially offset by growth in 6 out of 14 service sub-sectors. The largest contributor to this was human health care, social work and other service activities, which increased by 0.3% and 2.0% respectively.
Despite the decline in the services sector, consumer-oriented services grew 0.4 percent in February, helped by retail activity expanding at the fastest pace since October. Consumer-oriented services are still 8.9% below pre-pandemic levels, while other services have offset losses to 2.2%.
—With support from Elina Ganatra.
(Updated details from report.)
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