UK GDP grew 0.5% in February before the Iran war started, as strong services and production offset weakness in construction.
UK growth of 0.5% in February was much higher than the 0.1% recorded in January, showing the UK economy was getting itself on a better footing before the US and Israel launched attacks on Iran.
Luke Bartholomew, Deputy Chief Economist at Aberdeen, said: “The UK economy grew much faster than expected in February after a period of very sluggish growth.”
Bartholomew continued to explain that although the data for February was strong, the world was a very different place now and that upcoming data points, such as unemployment figures, would be a better guide to the health of the UK economy.
“While it is no doubt of some interest that the stronger survey data from earlier this year did indeed translate into stronger hard data, ultimately this report feels very dated given all that has happened since February,” he said.
“As the IMF recently pointed out, the UK economy was very exposed to the shock from the Iran war as a large energy importer with weakly anchored inflation expectations and an already very soft labour market. So next week’s inflation and employment data will provide an important early sign of how this shock is playing out, and have much more influence on the path of interest rates than this report. But with energy markets having stabilised recently, we think the Bank of England is unlikely to hike interest rates in the near term.”