The Office for National Statistics said the British economy expanded more than expected in February, offering a brief boost to growth before rising energy prices and geopolitical tensions cloud the outlook.
Gross domestic product grew by 0.5% in February, significantly above economists’ expectations of a 0.1% increase.
The reading marked the strongest monthly growth since June 2023, when the economy expanded 0.6%.
The data also showed that GDP growth was 0.5% in the middle of the first quarter, compared with 0.1% growth in January, suggesting stronger momentum at the start of the year than previously thought.
Broad-based growth across sectors
The February expansion was supported by gains across multiple sectors.
Services and production both grew by 0.5%, while construction output rose by 1.0%, indicating a broad-based recovery.
ONS chief economist Grant Fitzner said the improvement was driven by several areas within services.
“Growth increased further in the three months to February led by broad-based increases across services,” he said.
He noted that wholesaling, market research, hospitality and publishing performed strongly during the period, while car production rebounded after earlier disruptions.
Fitzner added that growth in services and production was partially offset by continued weakness in construction, as well as declines in leasing and intellectual property licensing.
Despite the stronger February data, the broader trend remains one of sluggish expansion.
The UK economy has grown in only four of the past seven months, reflecting a prolonged period of weak performance stretching back to the global financial crisis.
Energy shock clouds outlook
Economists caution that the February figures may represent a temporary improvement before the full impact of rising energy prices is felt.
Oil and gas prices have surged sharply since late February following the escalation of conflict in the Middle East.
Benchmark crude and European gas prices have risen more than 30% since the initial strikes on Iran on Feb. 28, raising concerns about inflation and consumer spending.
The International Monetary Fund has already lowered its UK growth forecast for 2026 to 0.8% from 1.3%, reflecting the deteriorating global outlook.
The Bank of England has also warned that inflation could be higher than previously expected.
While the central bank kept its key interest rate unchanged at 3.75% last month, investors are now pricing in at least one rate hike this year, reversing earlier expectations for rate cuts.
Economists warn of short-lived momentum
Analysts say the February rebound may not be sustained.
Andrew Hunter, associate director and senior economist at Moody’s Analytics, said the data points to stronger early-year momentum but warned that conditions have since weakened.
“The 0.5% month-over-month jump in UK GDP in February, and slight upward revision to January’s data, echoes the earlier improvement in the surveys and suggests the economy had more momentum at the start of this year than previously thought,” he said.
However, he cautioned that “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.”
Hunter added that the hit to household incomes and confidence would likely keep growth subdued, noting that forecasts for this year have been lowered accordingly.
‘Calm before the storm’ for UK growth
Sanjay Raja, Deutsche Bank’s chief economist described the February data as “the calm before the storm” for the UK economy, highlighting the contrast between recent growth and emerging risks.
Raja added that growth in the first quarter could reach 0.5-0.6% quarter-on-quarter, supported by stronger spending and investment.
However, he warned that this momentum is unlikely to last.
“The good news is that the UK likely entered the energy shock on a stronger footing than many expected,” he said, adding that first-quarter growth could exceed earlier projections.
“The bad news is that upward GDP momentum won’t last. This will likely be the growth before the energy squeeze,” he said, pointing to rising fuel costs and higher household bills.
He noted that pump prices have risen more than 20% since the oil shock, while energy bills are expected to increase further over the summer.
Businesses, meanwhile, may scale back investment and hiring plans.
Suren Thiru at The Institute of Chartered Accountants in England and Wales said the figures are “unlikely to ease stagflation fears” given that February’s surprisingly strong growth has been pushed firmly into the rear-view mirror by the renewed energy and supply chain shocks.
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