There is another major set-piece moment for the UK economy, when Thursday’s growth readout will test the trend for a more robust performance in the face of high inflation and the cost-of-living crisis.
Gross domestic product data for February will track the size of the economy via all the goods and services produced in the month. After a stronger-than-expected expansion of 0.3% in January, the numbers will reveal if the trend for the UK to head away from recession continued.
This time around, GDP is expected to show even more modest growth – of 0.1 per cent according to consensus forecasts – enough to keep City experts more positive than the bleaker predictions originally made for 2023. And it is also sufficient to keep the country out of the technical definition of recession, set at two consecutive quarters over which GDP shrinks.
That will make welcome reading in Downing Street, just a month after Chancellor Jeremy Hunt’s first full Budget.
Economists at HSBC are a little more upbeat than some other City commentators, pointing to strong February retail sales numbers seen in the month, with the service sector expected to take a lead role. The bank predicts overall growth of 0.2%, but does not expect all parts of the economy to grow.
“Manufacturing activity likely remained muted during the month while construction decelerated,” it said in a note to clients.
HSBC has also dropped predictions of 2023 recession, as have the Bank of England and the Office for Budget Responsibility. “We no longer expect a recession in the UK and recently raised our GDP growth forecast for 2023 to +0.4% from -0.4%,” it said.
Low growth is better than an overall contraction, but a February expansion of 0.1% will also remind politicians and investors of the UK’s struggle to energise its economy.
Its recovery is behind other nations, with the overall size of its GDP only surpassing pre-Covid levels with data for November 2022, months behind other major economies.
Deutsche Bank’s Sanjay Rana expects what he calls “stagnation this year” for the economy, before “expansion in 2024”. He also predicts 0.1 per cent growth for February, but expects it to be “broad-based … driven by services activity (+0.1 per cent month-on-month), industrial production (+0.2 per cent m-o-m), and construction output (+0.7 per cent m-o-m).
February’s GDP numbers are out at 7.00 a.m.
