Responding to the February growth figures, Jessop, Economics Fellow at the
Institute of Economic Affairs said:
"The news that the UK economy grew by 0.5% in February is a
welcome surprise but should come with plenty of health warnings.
"For a start, monthly GDP data are notoriously volatile and often
revised. A sharp correction is possible in March and especially
in April, when the increases in taxes and other business costs in
last October's Budget actually kick in.
"Moreover, the official data are far stronger than indicated by
the latest business and consumer surveys. These do suggest that
the economy has picked up a little, but nowhere near this
strongly.
"February's data may also have been flattered by some special
factors. In particular, there was a 2.2% jump in manufacturing
output, which again is hard to square with the industry surveys.
"This may have been boosted by activity brought forward to beat
new US tariffs, or just reflect the usual noise in these data.
Either way, a global trade war remains a big downside risk for
the rest of the year.
"That said, there are some encouraging signs in the data too.
Above all, consumer spending on services is rising strongly. With
real wages still growing at a decent pace and household savings
relatively high, the UK economy is still likely to grow by around
1% over the year as a whole.
"However, sentiment is clearly fragile, especially with the
labour market weakening, taxes expected to rise further, and the
US-China trade war escalating.
"Overall, the UK economy looks set to avoid the outright
recession that some feared, but the strong start to the year is
unlikely to be sustained.
"In the meantime, the Government needs to do more to restore
consumer and business confidence and break free from the doom
loop, while liberating the private sector from unnecessary costs
and red tape."
