Flat February Print Makes Q1 Contraction Unlikely

The UK economy stalled in February, after an upwardly revised +0.4% m/m January expansion. This was slightly softer than the +0.1% m/m expected by consensus, yet made up for by the January revision (up 0.1pp).

• The flat reading was generated by mild contractions in industrial production (-0.2% m/m) and services (-0.1%) - albeit the latter was expected by consensus.
• The February dip in services was driven by industrial action activity across public services, including the strikes in the education sector.
• February weakness was largely offset by robust construction growth (+2.4% m/m) - a combination of a bounce-back from a January dip and stronger repair and maintenance activity.
• According to an ONS spokesperson, for a positive Q1 reading, March GDP will need to be at least -0.2%. Anything weaker down to -0.6% would imply a flat reading for Q1. A substantial March contraction of over -0.6% m/m would be necessary for a contractionary Q1.
• Overall the data was largely in line with Bank of England expectations for an economy remaining largely flat, so there is little new information for policymakers ahead of the May 11 policy decision.
• Later today, BOE Chief economist Huw Pill speaks at an MNI Connect event (register here).

Source: ONS