United Kingdom: The economy performs better than expected in February amid stockpiling
April 10, 2019
According to monthly GDP data released by the Office for National Statistics (ONS), economic activity rose 0.2% in February over the prior month in seasonally-adjusted terms, down from January’s 0.5% increase but above market expectations of a flat reading. In the December-February period, the economy grew 0.3%, matching the reading in the November-January period. The economy’s unexpectedly strong performance in February can be explained by manufacturing firms stockpiling in preparation for a possible no-deal Brexit; however, when this effect predictably unwinds in the coming quarters it could depress growth. Moreover, the economy is still growing notably slower than before 2018, as Brexit uncertainty dampens business investment.
Looking at a sector-by-sector picture, the December-February reading was underpinned by a solid showing from the manufacturing sector—likely lifted by stockpiling—and services, with the latter aided by rock-bottom unemployment and solid wage growth.
Author: Oliver Reynolds, Economist