The UK economy saw positive movement as Gross Domestic Product (GDP) increased by 0.1 per cent in February, marking growth for two successive months after a revised growth of 0.3 per cent in January, according to data from the Office for National Statistics (ONS). This upward trend suggests a slow recovery for the UK economy from the recession witnessed in the latter part of the previous year, with the production and services sectors performing better.
Despite the overall growth in GDP, the construction sector faced a decline of 1.9 per cent, offsetting some of the gains from the production and services sectors. The gradual recovery of the UK economy has been bolstered by expectations of interest rate cuts by the Bank of England in the future, as well as easing inflation, which dropped to 3.4 per cent in February despite interest rates remaining high at 5.25 per cent.
The implementation of tax cuts by Chancellor Jeremy Hunt in April, following the March budget, is anticipated to further boost demand within the UK economy. Forecasts indicate a potential reduction in inflation in the upcoming months, propelled by decreases in average energy bills. Director of economic statistics at ONS, Liz McKeown, highlighted the positive growth in manufacturing, specifically in the automotive industry, and in services like public transport and telecommunications, while also pointing out the challenges faced by the construction sector due to adverse weather conditions.
Although there are positive indicators of economic progress, the UK's growth remains modest compared to previous years, influenced by factors like high borrowing costs and the lasting impact of the cost of living crisis. Projections suggest a GDP growth of around 0.6 per cent this year, positioning the UK among the weaker performers in the G7 countries. Investor expectations for interest rate cuts by the Bank of England have tempered as concerns about inflation challenges in developed nations persist, with initial forecasts for six cuts revised down to about two, highlighting the complexities of achieving the targeted 2 per cent inflation level.