Growth was driven by manufacturing, the largest contributor to GDP in the month with growth of 1.1%, following a fall of 0.3% in January. But construction output tumbled by 1.9% amid a decline in new work and poor weather, which delayed repair and maintenance activity. The service sector grew by 0.1% in February, following a revised rise of 0.3% in January.
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February’s growth means the UK economy is likely to have climbed out of recession in the opening quarter, following two consecutive quarters of negative growth in the second half of last year, with the Easter holiday expected to have boosted activity in sectors such as retail.
However, commentators declined to get carried away, with one branding UK growth “pitiful” compared with the US. Another declared that “the levels of growth aren’t very inspiring” while one economist stated the “lagged impact of earlier interest rate hikes and chronic supply side constraints [are] likely to continue limiting the UK’s growth potential”.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “These figures mean the UK economy is likely to have expanded in the first quarter overall, marking an end to recession. With that said, the levels of growth being displayed aren’t very inspiring, particularly for our large services industry.
“Falls in construction activity also indicate a broader malaise the UK is yet to shake off. We’ve known for some time that major housebuilders have been building fewer homes, as people wait for finances to improve before making large financial decisions. Heavy rainfall has also dampened construction activity, as repair and maintenance work were delayed. All in all, the rate of economic growth has slowed, and there’s still a lot of extra coals needed to stoke the UK’s engines.”
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Danni Hewson, head of financial analysis at AJ Bell, said the UK “seems to be trudging slowly out of last year’s short-lived recession”.
“But at 0.1% in February and even with the upwardly revised 0.3% in January, UK growth looks pretty pitiful when you compare it to the economic picture on the other side of the Pond,” she said.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), suggested the February figures could lead to interest rates remaining higher for longer than expected. The base rate is currently 5.25%, having being lifted through a series of rises by the Bank of England from a historic low of 0.1% in December 2021.
Mr Thiru said: “It’s a racing certainty that the UK exited recession in the first quarter with output likely to have picked up further in March, particularly with the earlier Easter holiday lifting activity in key sectors, including retail.
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“While recession concerns are disappearing into the rear-view mirror, the longer-term outlook is still difficult, with the lagged impact of earlier interest rate hikes and chronic supply side constraints likely to continue limiting the UK’s growth potential.
“This GDP increase may give those rate setters still concerned about persistent price pressures sufficient reassurance on the economy to keep interest rates higher for longer than many expect.”
