Britain’s Economy Shows Signs of Recovery as GDP Grows for Second Consecutive Month
Official data released on Friday revealed that Britain’s economy is on track to exit a shallow recession, with output expanding for a second month in a row in February. The Office for National Statistics reported that gross domestic product (GDP) grew by 0.1% in monthly terms in February, in line with economists’ expectations. Additionally, January’s reading was revised higher to show growth of 0.3%, up from 0.2% previously.
The data indicates that Britain’s economy started 2024 on a stronger footing, with the three-month average growth rate rising to 0.2% in February from zero in January – the highest reading since August. This positive trend is likely to influence the Bank of England’s stance on interest rate cuts, as the economy is expected to slightly exceed the central bank’s forecast for a 0.1% expansion in the first quarter.
Following a recession in the second half of last year, Prime Minister Rishi Sunak faces the challenge of reassuring voters about the economy’s stability ahead of an expected election later this year. Finance minister Jeremy Hunt welcomed the latest data as a sign that the economy is turning a corner, while the opposition Labour Party criticized the Conservative government for low growth after 14 years in power.
Business surveys suggest that growth continued in March, and the ONS stated that Britain could avoid a recession even if GDP contracts sharply in March by around 1%, assuming no revisions to prior months’ data. Despite the tentative recovery, GDP remains below its level of June 2023 and has remained relatively flat since early 2022.
Looking ahead, Suren Thiru, economics director at ICAEW, warned that the longer-term outlook remains challenging due to the lingering impact of earlier interest rate hikes and supply side constraints. Economic output in February 2024 was 0.2% lower than its level in February 2023, slightly better than economists’ predictions.
The services sector, which dominates the economy, grew by 0.1% in February, while manufacturing output exceeded expectations with a 1.2% increase. However, construction saw a significant decline of 1.9%, the largest drop in over a year. Despite these fluctuations, the overall data suggests that Britain’s economy is showing signs of recovery after a period of contraction.