UK economic system far exceeds forecasts to develop 0.5% in increase to Rachel Reeves

The UK economic system unexpectedly expanded by 0.5% in February, figures present, in a lift for Rachel Reeves earlier than an anticipated downturn triggered by Donald Trump’s tariff conflict.

The rise in gross home product in February was 5 occasions bigger than the 0.1% {that a} ballot of Metropolis economists had forecast, whereas January’s determine of a modest fall of 0.1% was revised as much as 0.0% development.

Nonetheless, it may mark the final month of growth earlier than the affect of the US president’s international commerce conflict – which started in earnest final month with tariffs on Canada, Mexico and metal – started to dampen enterprise funding and shopper spending.

The Workplace for Nationwide Statistics stated UK development was throughout all sectors of the economic system, together with the manufacturing business, which bounced again from a protracted downturn.

Building, which contracted in January, additionally recovered to point that the federal government’s help for housebuilding was starting to pay dividends. Throughout the providers sector, laptop programming, telecoms and automotive dealerships all had robust months.

Nonetheless, the turnaround within the economic system might not final. This month, shoppers have been hit by inflation-busting utility invoice and council tax will increase, whereas employers should address £25bn of tax rises.

Simon Pittaway, an economist on the Decision Basis thinktank, instructed the shock turnaround in fortunes was unlikely to proceed into the spring and summer time. “It’s questionable whether or not this momentum will final, nonetheless, as Britain strikes into an period of upper tariffs, and better financial uncertainty,” he stated.

The ONS figures indicated that buyers had been extra assured about spending regardless of many surveys displaying households feeling the burden from store value inflation over the earlier three years.

Companies expanded 0.3% on the earlier month and consumer-facing providers output rose for the fourth month in a row, by 0.7% month on month.

Capital Economics stated it was doable the manufacturing sector had benefited from “tariff frontrunning” as corporations within the US constructed up inventories to beat greater import prices.

Industrial manufacturing rebounded by 1.5% month on month after a fall in January of 0.5%. An increase of two.2% in manufacturing from January was pushed by a 2.1% improve in metals output, a 1.8% improve in transport gear and a 4.4% rise in prescribed drugs output.

Reflecting the increase in air journey as households use their disposable incomes to go on vacation, journey brokers and tour operators skilled an 8.1% improve in revenue within the three months to February on the earlier three-month interval.

Stephen Kinnock, a well being minister, cautiously welcomed the most recent GDP figures however stated there was nonetheless extra to do to enhance the UK’s financial prospects.

Talking on Instances Radio, he stated: “Clearly, the steadiness that this authorities … has introduced helps traders to make plans for the long term. That helps drive up funding, which drives up employment, drives up development, and that’s excellent news, after all. There’s nonetheless a really lengthy method to go.”

Reeves stated the federal government was conscious that impending tariff will increase on items exports to the US could be a heavy burden for a lot of companies. The chancellor stated: “This authorities will stay pragmatic and cool-headed as we search to safe the perfect cope with the US that’s in our nationwide curiosity. On the identical time we shall be relentless in our work to kickstart financial development, present safety for working folks and renewal for Britain.”

Capital Economics stated that stepping again and taking a look at “the massive image” confirmed the economic system had grown in solely 4 of the final 9 months and “it’s exhausting to see the economic system strengthening a lot from right here”.

Mel Stride, the shadow chancellor, stated: “Since coming to workplace, Labour’s decisions have killed development stone-dead and there’s nonetheless a protracted method to go to get well.

“On the emergency price range, the forecasts for development, inflation and borrowing all moved within the fallacious course due to Labour’s choices.”