The British economy slowed in February when public sector employees went on strike, but the January rebound was greater than expected, suggesting that a recession is less probable in early 2023, according to official figures.
In February, economic production was unchanged month on month, compared to a 0.1% increase predicted by analysts polled by Reuters.
However, the Office for National Statistics (ONS) raised its estimate for January’s growth to 0.4% from 0.3%, suggesting that Britain is unlikely to see the first-quarter drop anticipated by the Bank of England last month.
The bigger picture remains weak. While sidestepping recession for the time being, Britain’s economy has stagnated over the last year.
International Monetary Fund projections published this week showed Britain bottom of the world’s major economies in terms of expected economic growth in 2023, with a 0.3% contraction penciled in, equivalent to a 0.7% fall on a per capita basis.
Suren Thiru, economics director at accountancy body ICAEW, said recession fears would linger as higher taxes and borrowing costs offset the fall in inflation and government support for energy bills.
“These figures suggest that the economy has lost momentum as sky-high inflation and strike action continue to drag on key drivers of UK GDP, notably services and industrial production,” Thiru said.
He said the BoE should end its run of interest rate hikes next month as raising rates would further weaken the country’s growth prospects.
The ONS said the vast services sector contracted by 0.1% in February, hurt by strikes by teachers and other public sector workers, but was offset by a surge in the much smaller construction sector which rebounded from bad weather in January, the ONS said.
The upward revision to January means the economy would need to have shrunk by 0.6% in March for the first quarter as a whole to show a contraction.
Finance minister Jeremy Hunt said the data showed Britain’s economic performance had been stronger than thought.
Thursday’s figures showed a 2.4% surge in construction output – which represents around 6% of the economy – was the sole driver of economic growth in February.
ONS officials attributed the jump in construction output to a recovery in February from disruption caused by bad weather in January, especially in new work, and a surge in maintenance and repair work.