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February’s growth shows UK probably on “a stronger footing” than expected before energy shock<\/p>\n
February\u2019s GDP report shows \u201cthe calm before the storm\u201d that is now hitting the UK economy from the Middle East, reports Sanjay Raja, Deutsche Bank\u2019s chief economist.<\/p>\n
Raja says February GDP \u201csmashed expectations\u201d by coming in at \u201ca thumping 0.5%\u201d month-on-month.<\/p>\n
He says it shows forecasters were too pessimistic about UK growth at the start of the year:<\/p>\n
double quotation markOur nowcast models now show Q1-26 GDP growth returning back to our original forecast from the start of the year: 0.5-0.6% q\/q, reflecting some positive payback after a very sluggish second half in 2025. Given today\u2019s data, spending looks stronger than anticipated. And firms may also be investing more than we thought heading into the Iran conflict.<\/p>\n
But the impact of higher energy prices, and weaker business investment, will hurt growth this year, he adds:<\/p>\n
double quotation markThe good news is that the UK likely entered the energy shock on a stronger footing than many expected. Q1-26 GDP growth will likely hit more than double the quarterly rate many forecasters expected, also lifting annual GDP growth projections. The bad news is that upward GDP momentum won\u2019t last. This will likely be the growth before the energy squeeze.<\/p>\n
Households will have already started to feel the impact of the Iran energy shock, impacting disposable incomes and discretionary spending. Pump prices are up over 20% since the oil shock occurred. And dual fuel bills are due to rise by a similar amount over the summer. Businesses will also likely be pulling back investment plans, hiring plans, and lowering wage growth as a result. As such, expect more sluggish growth into Q2-26 (and beyond).\u201d<\/p>\n
Share<\/a>Moody’s: upturn likely to be short lived<\/p>\n The UK\u2019s growth acceleration in February is likely to be \u201cshort-lived\u201d, due to the Iran war, warns Andrew Hunter, associate director and senior economist at Moody\u2019s Analytics:<\/p>\n double quotation mark\u201cThe 0.5% month-over-month jump in U.K. GDP in February, and slight upward revision to January\u2019s data, echoes the earlier improvement in the surveys and suggests the economy had more momentum at the start of this year than previously thought.<\/p>\n However, with those surveys weakening quite sharply in March as the Middle East conflict sent energy prices soaring, this upturn is likely to prove short lived.<\/p>\n The hit to household real incomes and renewed blow to confidence is likely to keep economic growth subdued over the coming months and we have lowered our growth forecasts for this year in our April baseline.\u201d<\/p>\n Share<\/a><\/p>\n Britain\u2019s construction sector had a volatile winter, mainly due to a drop in activity in December.<\/p>\n Monthly construction output is estimated to have increased by 1.0% in February, twice as fast as the 0.5% growt recorded in January.<\/p>\n But in December, activity fell by 1.3% \u2013 due to a drop in new work.<\/p>\n Share<\/a><\/p>\n UK production output growth was mainly driven by growth in mining and quarrying (up 3.9%), and electricity, gas, steam, and air conditioning supply (up 1.5%).<\/p>\n Water supply; sewerage, waste management, and remediation activities also grew in February 2026 (up 0.2%).<\/p>\n But there was a 0.1% fall in manufacturing output \u2013 due to a drop in manufacture of transport equipment (although this did growth strongly in the December-February quarter).<\/p>\n Share<\/a>How the services sector helped UK economy to smash forecasts<\/p>\n \u201cWidespread growth\u201d across the UK services sector helped the economy to expand strongly in February, by an impressive 0.5%<\/a>.<\/p>\n Today\u2019s GDP report shows that 12 of the 14 subsectors of the services economy grew during the month, helping services to grow by 0.5%.<\/p>\n \u201cAdministrative and support service activities\u201d made the largest contribution (up 2.0%), due to a pickup in hiring activity.<\/p>\n The second largest positive contribution came from wholesale and retail trade; repair of motor vehicles and motorcycles (up 0.7%).<\/p>\n Professional, scientific, and technical activities also contributed to the growth, with a rise of 0.8% in February 2026.<\/p>\n Share<\/a><\/p>\n Updated at\u00a002.21 EDT<\/p>\n Chart: How UK growth was accelerating before Middle East conflict Illustration: ONSShare<\/a>ONS: Growth increased further in the three months to February<\/p>\n The UK economy also grew by 0.5% in the three months to February, helped by the end of the cyber-attack disruption at Jaguar Land Rover last autumn.<\/p>\n That\u2019s up from 0.3% growth in the three months to January.<\/p>\n ONS chief economist Grant Fitzner says:<\/p>\n double quotation mark\u201cGrowth increased further in the three months to February led by broad-based increases across services.<\/p>\n \u201cWithin services, growth was driven by wholesaling, market research, hospitality, and publishing, which all performed well in the three months to February. Meanwhile car production recovered from the effects of the autumn cyber incident.<\/p>\n \u201cGrowth in services and production was partially offset by another fall in construction, albeit at a slower rate than previously, with leasing and intellectual property licencing also continuing to contract.\u201d<\/p>\n Share<\/a>UK economy smashes forecasts with 0.5% growth in February<\/p>\n Newsflash: The UK economy was growing much faster than expected before the Iran war jolted global activity.<\/p>\n UK GDP rose by 0.5% in February, new data from the Office for National Statistics shows. That\u2019s much stronger than the 0.1% growth the City had expected.<\/p>\n The ONS reports that services and production both grew by 0.5%, and construction grew by 1.0% in February.<\/p>\n January\u2019s GDP data has been revised up too \u2013 to show 0.1% growth, rather than stagnation.<\/p>\n In normal times would be a significant boost to Rachel Reeves.<\/p>\n However, this data is somewhat historic, as the Middle East conflict is reshaping the prospects for the global economy this year, driving up energy and fuel prices, and borrowing costs, and hurting confidence.<\/p>\n Earlier this week the IMF cut its forecast for UK growth in 2026 to 0.8%, down from 1.3%.<\/p>\n Share<\/a><\/p>\n Updated at\u00a002.18 EDT<\/p>\n China’s economy beats forecast in first quarter<\/p>\n Economic growth in China has accelerated in the last quarter, in an encouraging start to the year for Beijing.<\/p>\n China\u2019s gross domestic product (GDP) grew by 5%, year on year, in the first quarter of 2026, data from the National Bureau of Statistics (NBS) released today shows.<\/p>\n That\u2019s 0.5 percentage points faster than in the fourth quarter of 2025,<\/p>\n The NBS says \u201cThe national economy got off to a good start\u201d, explaining:<\/p>\n double quotation mark\u201cThe growth of production and supply accelerated, market demand continued to improve, employment was generally stable, market prices picked up moderately, and high-quality development advanced with new and positive momentum.\u201d<\/p>\n Share<\/a>Reeves gives more energy bill support to businesses as Iran war pushes up costs Rachel Reeves has announced an expansion of support for the most energy-intensive UK businesses, as they face soaring bills as a result of the Middle East conflict.<\/p>\n The chancellor said the long-promised British Industrial Competitiveness Scheme (BICS) would be expanded to cover 10,000 companies, up from the 7,000 originally announced.<\/p>\n The scheme, which the government says will cut companies\u2019 bills by up to 25%, will not come into operation until next year, although in a significant concession Reeves said support would then be backdated to this month.<\/p>\n The announcement was welcomed by business groups, but some criticised the fact the money would not arrive until next April, urging Reeves to bring support forward as they face a looming crisis as a result of the ongoing closure of the strait of Hormuz<\/a>.<\/p>\n![\"Richard](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/04\/1776321728_365_Richard_Partington,_R.png\")
Richard Partington<\/p>\n