The economy grew by 0.1 per cent in February: not much to celebrate on its own but the small uptick in GDP all but confirms that the UK is leaving its recession in 2023.
February wasn’t a booming month: services output only grew by 0.1 per cent, with transportation and storage services contributing the most to the sector’s growth (the former seeing its biggest boost since June 2020). The construction sector decreased by 1.9 per cent in volume terms, as the ‘fourth wettest February on record in England’ delayed projects. But a bounceback in production – the ‘largest contributor to the growth in GDP’ that month – provided some balance: overall production output grew by 1.1 per cent in February, recovering from a 0.3 per cent fall the previous month.
As has been the case since Britain’s initial pandemic recovery, the month-on-month GDP update remains lacklustre. But even slight growth in February, combined with an upward revision of January’s figures from 0.2 per cent to 0.3 per cent, all but confirms that Britain’s recession will stay confined to 2023.
Capital Economics this morning estimates that GDP would need to fall by 1 per cent or more in next month’s release for March – an unlikely scenario – for the UK economy to contract again in Q1 this year extending the recession. ‘We can safely say,’ says the forecaster, ‘that after lasting just two quarters and involving a total fall in GDP of just 0.4 per cent or so, the recession ended in Q4’ last year.
None of this will be confirmed until mid-May (notably after the local elections), when the quarterly growth figures are next released. But as far as Rishi Sunak’s priority list is concerned, today’s GDP news is a big upgrade from yesterday’s NHS update.
While there is no current scenario in which the government can claim it is meeting its pledge from last year to reduce NHS England’s waiting list, it does seem that the pledge to ‘grow the economy’ is starting to come good in a way that ministers can whisper about. After having 2023 growth revised down substantially in the March Budget, just two months of 2024 data suggest there is scope for the UK economy to grow faster than expected this year: even a small uptick in GDP in March would outperform the Bank of England’s latest forecast for Q1 growth.
Of course ministers have to remain careful about how they promote a story about growth. The Prime Minister has been suggesting recently that the economy is ‘turning a corner’, so as to not insist – as the country still reels from the latest inflation and cost-of-living crisis – that all has been fixed. It is language repeated by Chancellor Jeremy Hunt this morning, who added that the economy ‘can build on this progress’ in the coming months to create an even better growth story. But the gap between a more vibrant economy and people feeling the benefits of this remains wide, as living standards remain well below their pre-pandemic levels, with no evidence that they’ll recover anytime soon.
