London, United Kingdom. Britain’s economy recorded stronger-than-expected growth in February, official data showed, suggesting it was in slightly better shape before the start of the Iran war than many economists had feared.
February growth exceeds expectations
Gross domestic product expanded 0.5 per cent month-on-month in February, the biggest increase since January 2024, the Office for National Statistics said. Economists polled by Reuters had forecast growth of 0.2 per cent.
Economists cite vulnerability to energy shock
Economists said the figures were likely to cheer finance minister Rachel Reeves but warned Britain remained vulnerable to the fallout from the Middle East conflict, given its reliance on imported energy and its tendency toward higher inflation than peers.
“Unfortunately, the latest energy price shock has likely pulled the rug on this momentum, with another year of above-target inflation and a softening labour market likely to come,” said Fergus Jiminez-England, associate economist at the National Institute for Economic and Social Research.
IMF growth forecast cut and services-led expansion
Britain suffered the sharpest cut to economic growth forecasts for large rich economies by the International Monetary Fund, due largely to the Iran war, in forecasts published earlier this week.
“Growth increased further in the three months to February led by broad-based increases across services,” ONS chief economist Grant Fitzner said. “Meanwhile car production recovered from the effects of the autumn cyber incident.”
The ONS said economic growth for the three months to February was 0.5 per cent, putting Britain’s economy on track for a conspicuously strong first quarter for a third year running.
Seasonal adjustment questions raised
The repeated pattern of strong first-quarter performance has led to suspicions among some economists that the ONS’ process of seasonal adjustment has gone awry following unusually large swings in output during the COVID-19 pandemic, something the ONS rejects.
How do you think the Iran war-related energy shock could affect the UK economy in the coming months?