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United Kingdom: The economy performs better than expected in February

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Christian Fernsby ▼ | April 11, 2019
According to monthly GDP data released by the Office for National Statistics (ONS), economic activity rose 0.2% in February over the prior month in seasonally-adjusted terms, down from January’s 0.5% increase but above market expectations of a flat reading.
UK workers
Britain   In the December-February period, the economy grew 0.3%
In the December-February period, the economy grew 0.3%, matching the reading in the November-January period.

The economy’s unexpectedly strong performance in February can be explained by manufacturing firms stockpiling in preparation for a possible no-deal Brexit; however, when this effect predictably unwinds in the coming quarters it could depress growth.

Moreover, the economy is still growing notably slower than before 2018, as Brexit uncertainty dampens business investment.

Looking at a sector-by-sector picture, the December-February reading was underpinned by a solid showing from the manufacturing sector—likely lifted by stockpiling—and services, with the latter aided by rock-bottom unemployment and solid wage growth.

Looking ahead, the outcome of Brexit is key; leaving the EU with a deal, or remaining in the EU, would likely unleash pent-up investment and boost consumer sentiment, while leaving with no deal could cause a serious economic shock.

An extension to Article 50 would prolong uncertainty and thus continue to hamper investment.

The Central Bank expects the economy to expand 1.2% in 2019 and 1.5% in 2020.

FocusEconomics panelists see GDP expanding 1.3% in 2019 and 1.5% in 2020.