Financial News: UK GDP Growth Beats Expectations

UK GDP Growth Beats Expectations

(RTTNews) - The UK economy logged a robust growth in February before the outbreak of the war in the Middle East, which poses significant downside risks to outlook.

Gross domestic product logged a monthly growth of 0.5 percent in February, outpacing the 0.1 percent expansion in January, the Office for National Statistics reported Thursday. Economists had forecast the growth to remain unchanged at 0.1 percent.

On the production-side, the dominant service sector expanded 0.5 percent and construction output advanced 1.0 percent in February.

Industrial production grew 0.5 percent, following successive falls of 0.1 percent in January and a 0.4 percent drop in December. Meanwhile, manufacturing output edged down 0.1 percent, reversing January's 0.2 percent increase.

Compared to the same period last year, GDP advanced 1.0 percent in February.

On a yearly basis, industrial production slid 0.4 percent and manufacturing dropped 0.5 percent in February. In the three months to February, real GDP expanded 0.5 percent, following a growth of 0.3 percent in the three months to January. GDP grew 0.8 percent from the same three months a year ago. The visible trade deficit widened to GBP 18.79 billion in February from GBP 15.1 billion in January, the ONS said in a separate report. Exports of goods dropped 3.9 percent, while imports increased 4.7 percent from the prior month.

The total trade balance showed a shortfall of GBP 720 million compared to a surplus of GBP 3.0 billion a month ago.

ING economist James Smith said the GDP growth in February is consistent with a trend which dates back to 2022, where growth has tended to come in much stronger in the first quarter than over the rest of the year. The economist said growth is likely to slow regardless into the summer as inflation rises towards 4 percent beyond July. The Bank of England is likely to keep its interest rate unchanged at 3.75 percent throughout 2026, Smith said.

As the data predates the Iran war, the full impact of the energy and shipping shocks has yet to come through, British Chambers of Commerce Head of Research David Bharier said.

"In the short term, de-escalation and rapid recovery to supply chains is the only way to prevent a deeper economic crisis," Bharier added.

In the latest World Economic Outlook, the International Monetary Fund forecast the UK economy to grow only 0.8 percent this year and 1.3 percent in 2027.

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