The economy grew by 0.1 per cent in February, driven by improving output in the production and services sectors and continuing its recovery from recession.
Gross domestic product has increased for two months in a row after expanding by an upwardly revised 0.3 per cent in January, according to the Office for National Statistics, suggesting that the economy is set to have expanded in the first quarter of this year.
That would mean that Britain has exited the shallow recession it slipped into in the second half of last year. The rise in GDP was in line with City analysts’ forecasts.
Activity in the services and production sectors increased by 0.1 per cent and 1.1 per cent, respectively. However, growth was tempered by the construction sector contracting by 1.9 per cent. In the three months to February, GDP jumped by 0.2 per cent.
Growing expectations for interest rate cuts by the Bank of England and an easing in inflationary pressures have boosted demand among consumers and businesses. Inflation fell to 3.4 per cent in February, a larger decline than had been expected, while interest rates remain at a 16-year high of 5.25 per cent.
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Tax cuts by Jeremy Hunt in his March budget that have taken effect in April will further boost demand, while inflation is predicted to drop in the months ahead thanks to a reduction in average energy bills.
Liz McKeown, director of economic statistics at the ONS, said: ��The economy grew slightly in February, with widespread growth across manufacturing, particularly in the car sector. Services also grew a little, with public transport and haulage and telecoms having strong months.
“Partially offsetting this were notable falls across construction as the wet weather hampered many building projects. Looking across the last three months as a whole, the economy grew for the first time since last summer.”
The chancellor said:“These figures are a welcome sign that the economy is turning a corner and we can build on this progress if we stick to our plan. Last week our cuts to national insurance for 29 million working people came into effect across Britain, as part of our plan to reward work and grow the economy.”
Although the economy is gathering some momentum, growth is weak when compared with the past decade because of high borrowing costs and households still reeling from the cost of living crisis. UK GDP is expected to grow about 0.6 per cent this year, among the worst performances in the G7 group of leading economic powers. Investors also have reduced their expectations for the number of interest rate cuts by the Bank of England in 2024 to about two, from six at the beginning of the year, amid concerns that inflation in developed countries will prove tough to drag back to the widespread 2 per cent target.
