UK economic growth beats expert forecasts

The UK economy expanded ahead of economists' expectations in the three months to February, according to official data released today (Wednesday).

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The Office for National Statistics (ONS) reported a 0.3 per cent rise in GDP over the quarter, the figures boosted by stockpiling by manufacturers ahead of Brexit.In February, the economy grew by 0.2 per cent – a month when economists had been forecasting zero growth.

Which sectors are driving UK GDP growth?

Rob Kent-Smith, head of GDP data at the ONS, said: "GDP growth remained modest in the latest three months. Services again drove the economy, with a continued strong performance in IT."Manufacturing also continued to recover after weakness at the end of last year with the often-erratic pharmaceutical industry, chemicals and alcohol performing well in recent months."Manufacturing recorded a 0.9 per cent growth in February which, after a 1.1 per cent rise in January, meant that manufacturing output stood at its highest level since April 2008, driven by domestic demand.

Could GDP growth forecasts be revised upwards?

Costas Milas, professor of finance at Liverpool University, commented: "Stockpiling or not, today’s GDP reading suggests the economy grew at an annual rate of approximately 1.56 per cent on a three-month rolling basis (between December 2018 and February 2019), which is slightly higher than the 1.49 per cent forecast made by the Bank of England for 2019 Q1. The further good news is that ONS has revised upwards growth rates for 2018."This suggests a ‘carry over’ effect which should tempt the Bank of England revise upwards its 1.2 per cent forecast for 2019 as a whole. Mrs May should make the most of it. Indeed, she can legitimately warn her critics from Brussels: 'Back my efforts to secure extra time to sort out the Brexit mess or today’s relatively healthy economic performance will become a thing of the past in case snap elections and/or a disorderly Brexit gets in our way'."

Modest GDP growth in the shadow of Brexit

Seamus Nevin, chief economist at the manufacturers' organisation Make UK (formerly EEF), said: “While the positive performance of manufacturing will come as a relief after months of concern survey anecdotal evidence suggests that the results may, once again, be due to no-deal Brexit contingency planning, stockpiling and declining export demand for UK goods rather than a sign the economic fundamentals are sound."This, along with the increasing global economic slowdown again reinforces why British businesses need certainty on what form of Brexit the country is headed for. Business are trying to standstill until the Brexit fog clears but in doing so they are actually going backwards.”

UK growth in the context of the global slowdown

Ian Stewart, chief economist at Deloitte, added: “The UK is proving more resilient than expected in the face of a global slowdown and Brexit headwinds. The pace of growth could be choppy, but the UK is likely to grow at about the same pace as the eurozone this year.”Pablo Shah, senior economist at the Centre for Economics and Business Research (CEBR), said: “Today’s figures provide a glimmer of hope that the UK economy has gained some momentum at the start 2019, despite the effects of a slowing global economy and crippling uncertainty. CEBR forecasts that the UK economy will grow by 1.2 per cent over 2019, assuming that a modified version of the withdrawal agreement is passed in the coming weeks."However, risks to this forecast are stacked to the downside, with a resolution this year to the current parliamentary gridlock by no means a given.”
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