UK economy shows modest growth momentum with second consecutive monthly GDP increase

The UK economy showed signs of recovery as gross domestic product (GDP) rose 0.1 percent in February, driven by improved performance in both manufacturing and services sectors.

GDP has now grown for two months in a row, following an upwardly revised 0.3 percent growth in January, according to the Office for National Statistics (ONS). This positive trend suggests that Britain is gradually emerging from the recession it experienced in the second half of last year, although the pace of recovery remains modest.

The services sector saw an increase in activity of 0.1 percent, while the manufacturing sector saw a more notable growth of 1.1 percent. However, the construction sector witnessed a contraction of 1.9 percent, dampening overall growth for February. In the three months leading up to February, GDP rose by 0.2 percent.

Anticipation of interest rate cuts by the Bank of England in the near future, combined with easing inflationary pressures, has boosted demand within the UK economy. Inflation fell to 3.4 percent in February, exceeding expectations, while interest rates remained at a 16-year high of 5.25 percent.

Jeremy Hunt’s tax cuts, introduced in April following the March budget, are expected to further boost demand. Furthermore, forecasts predict a decline in inflation in the coming months, driven by reductions in average energy bills.

Liz McKeown, ONS director of economic statistics, highlighted positive growth in the manufacturing sector, especially automotive, and in services such as public transport and telecommunications. However, she noted a significant drop in construction due to adverse weather conditions.

Chancellor Jeremy Hunt expressed optimism about the economic progress reflected in the latest figures, and stressed the importance of adhering to the Government’s sustainable growth plan.

Despite these positive indicators, Britain’s growth trajectory remains modest compared to previous decades, driven by factors such as high borrowing costs and the lingering impact of the cost of living crisis. GDP is expected to grow by around 0.6 percent this year, putting Britain among the weakest performers in the G7.

Investor expectations of interest rate cuts by the Bank of England are muted, reflecting concerns about inflation problems in developed countries. Initial forecasts for six cuts have been revised down to around two, underscoring the complexity of bringing inflation back to the targeted 2 percent level.