GDP expanded 0.4% in month-on-month seasonally-adjusted terms in February, which contrasted January's 2.2% decrease. February’s reading was aided by a rebound in the manufacturing sector amid stronger car production, although the services sector was downbeat against a backdrop of tough Covid-19 restrictions.
On a rolling quarterly basis, GDP decreased 1.6% in December last year to February, which was greater than November last year to January’s 1.4% fall and marked the worst result since the three months up to July 2020.
February’s reading suggests only a mild contraction for Q1 as a whole, as the economy likely gained momentum in March due to the reopening of schools. The outlook for Q2 onwards is considerably brighter, as remaining restrictions are progressively lifted.
As Kallum Pickering, senior economist at Berenberg, said:
“The winter lockdown did not disrupt economic activity by as much the initial lockdowns during the first wave of the pandemic. Unlike in spring 2020, major parts of industry and construction operated mostly as normal. Meanwhile, households adjusted their behaviour to the new restrictions by shifting retail spending online and by purchasing more takeaway food services. […] The economic wheel of fortune seems to be turning back in the UK’s favour: A successful vaccine rollout, aggressive policy support and a solid global backdrop set the stage for at least two years of rapid economic rebound from the massive pandemic shock of 2020.”
FocusEconomics panelists expect the economy to expand 4.8% in 2021, which is up 0.2 percentage points from last month’s forecast, and 5.8% in 2022.