UK Economy Grows 0.5% In February, Beating Expectations

Britain's economy showed signs of recovery with a robust growth of 0.5 per cent in February, according to official data released on Friday, surpassing economists' projections and indicating a somewhat stronger position as it prepares for the repercussions of U.S. tariffs. The monthly gross domestic product growth was the most robust since March 2024 and surpassed all expectations in a Reuters survey of 30 economists, which had anticipated a 0.1 per cent increase. Earlier January data indicating a slight contraction was adjusted to reflect no growth. In comparison to a year prior, GDP increased by 1.4 per cent, surpassing forecasts.

Finance minister Rachel Reeves described the data as "promising," yet there was minimal response in the sterling to the unexpected growth. Markets are much more attentive to U.S. President Donald Trump's tariffs, which BoE Deputy Governor Sarah Breeden cautioned on Thursday could create a "chilling effect" on production. "The financial market chaos triggered by Trump's tariff announcements has effectively overshadowed February's figures," stated Suren Thiru, the economics director at the ICAEW accounting organisation. In March, government budget analysts reduced their economic growth forecast for Britain in 2025 to 1 per cent, a drop from last year's disappointing 1.1 per cent. The analysts predicted a more robust growth of 1.9 per cent in 2026.

Nonetheless, these predictions have been called into question by Trump's declaration last week of extensive tariffs on imports to the U.S. The tariffs increase the price of the majority of British exports to the United States by a minimum of 10 per cent. "UK GDP rising beyond forecasts in February offers some optimism that the economy might have experienced strong growth in the first quarter, after a sluggish period in the latter half of last year." "Nonetheless, the fundamental momentum in the private sector continues to be weak," stated Martin Sartorius, chief economist at the Confederation of British Industry.

ALSO READ: Saudi Crude to China to Surge in May After Price Fall, Sources Say

Even prior to the tariff announcement, Britain and various other European economies had begun to slow down because of concerns regarding U.S. trade policy. UK companies also indicated they were scaling back hiring and investment strategies because of a significant increase in employment taxes and the minimum wage that came into force this month. Nonetheless, there were indications that sluggish consumer spending had begun to improve as wage growth persisted in surpassing inflation and retail sales exceeded economists' forecasts in February. Services output increased by a modest 0.3 per cent in February, following a 0.1 per cent gain in January, according to data released on Friday. Meanwhile, manufacturing output surged by 2.2 per cent for the month, which the ONS attributed to a rise in electronics, pharmaceuticals, and automobile production.