United Kingdom: Economic activity growth eases in February
GDP increased 0.1% in month-on-month seasonally-adjusted terms in February, which was a deterioration from January’s 0.8% increase and undershot market expectations of a 0.3% expansion. The weakening was largely driven by a deterioration in the services sector, amid weaker pandemic-related health spending. In addition, the manufacturing sector fell amid supply difficulties, and storms hampered construction. More positively, within the services sector, tourism-related industries performed well thanks to the easing of travel restrictions in February.
On a rolling quarterly basis, GDP rose 1.0% in December last year to February, which was below November last year to January’s 1.3% expansion.
The fall in pandemic-related health spending (linked to the vaccination program and testing) muddied the economic picture in February and downplayed the economy’s underlying strength. Looking ahead, while the removal of all Covid-19 measures should be supporting activity, the war in Ukraine will be capping momentum due to the ensuing large shock to commodity prices.
On the latest figures and the outlook, analysts at Goldman Sachs commented:
“The level of GDP is now 1.5% above its pre-pandemic level, with services activity 2.1% above. Given today’s growth numbers, we have edged down our Q1 GDP growth estimate to 1.0%, and look for only a 0.2% gain in Q2, below consensus expectations following our downgrade to the UK outlook based on the impact of the war in Ukraine.”