Britain’s tepid economy is on course to exit a shallow recession after output grew for a second month in a row in February, and January’s reading was revised higher, official data showed on Friday.
Gross domestic product expanded by 0.1% in monthly terms in February, as expected in a Reuters poll of economists.
January’s reading was revised to show growth of 0.3%, up from 0.2% earlier, the Office for National Statistics (ONS) said.
The data confirm Britain’s economy started 2024 on a stronger footing, with the three-month average growth rate rising to 0.2% in February from zero in January - the highest such reading since August.
The figures are also likely to reinforce the Bank of England’s cautious tone around the prospect for interest rate cuts, with the economy on track to slightly exceed the central bank’s expectation for a 0.1% expansion in the first quarter.
Britain fell into recession in the second half of last year, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.
“These figures are a welcome sign that the economy is turning a corner,” finance minister Jeremy Hunt said in response to Friday’s data.
The opposition Labour Party, far ahead in opinion polls, said Britain was worse off with low growth after 14 years of Conservative government.
Business surveys suggest growth continued in March.
The ONS said Britain could now escape recession even if GDP contracts sharply in March by around 1% - assuming there are no revisions to prior months’ data.
Despite the tentative recovery, GDP remains below its level of June 2023, before the latest downturn took place, and has stayed broadly flat since early 2022.
“While recession concerns are disappearing into the rear-view mirror, the longer-term outlook is still difficult, with the lagged impact of earlier interest rate hikes and chronic supply side constraints likely to continue limiting the UK’s growth potential,” Suren Thiru, economics director at ICAEW, an accountancy industry body, said.
Economic output was 0.2% lower than its level in February 2023 - a little better than the 0.4% gap predicted by economists.
The services sector which dominates the economy grew by 0.1% in monthly terms in February, as expected. But manufacturing output exceeded forecasts, rising 1.2% on the month. Construction sank 1.9%, the biggest drop in just over a year.
FTSE 100 at record high: Britain’s FTSE 100 rose to a near-record closing high on Friday as soaring commodity prices lifted mining and oil stocks, while data showed Britain’s tepid economy is on course to exit a shallow recession.
The resources-heavy index breached the 8,000 mark at one point before closing 0.9% higher at 7,995.58, not far from its all-time closing peak of 8,014.31 set in February 2023.
The blue-chip benchmark earlier touched a session high of 8,044.98 - bringing it close to its intraday high of 8,047.06, also hit in February 2023.
Commodity-linked sectors such precious metal miners , industrial metal miners and energy jumped by between 3.1% and 4.6%, as gold prices hit a record and oil prices jumped by more than 2% on Middle East tensions.
Separately, european shares were flat on Friday after hitting a one-week high in early trade, as rising tensions in the Middle East eroded some of the continued optimism around the European Central Bank’s hint of imminent rate cuts.
The pan-European STOXX 600 ended the session 0.1% higher, after rising as much as 1.2% during the day, but logging its second straight weekly decline.
After an early trade rally, benchmark indexes in major economies such as Germany and France closed in the red, while that of Italy and Spain closed off the day’s highs.
The euro STOXX volatility index climbed to its highest level since October, reflecting some investor anxiety.
Automobiles and travel leisure led sectoral declines, while the energy sector jumped 2.4% to its highest level since 2008 owing to higher oil prices, geopolitical risks, and global economic uncertainty.
“It all smells of geopolitical risk coming through ... now we have a much more risk-off move,” said Andreas Bruckner, European equity strategist at BofA Global Research.
Luxury giants LVMH and Richemont lost 1.2% and 3%, respectively, weighing on the STOXX 600. The broader luxury sector shed 1.3% to a near two-month low.
Investors meanwhile drew some comfort from unchanged final March inflation readings from top economies in the eurozone, including Germany, France and Spain.
Optimism around interest rate cuts by major central banks this year had buoyed European shares since late 2023, with the ECB hinting rates could be
lowered, as early as June.
As for other sectors, basic resources jumped 2.4% to a near one-year high as copper prices jumped to their highest since June 2022.
Agencies