U.K. economy grows above expectations in February, GDP likely to grow 0.5 pct in Q1

U.K. economic growth is on track for a solid quarter. In spite of the ongoing uncertainty linked with the U.K.’s withdrawal from the EU, the U.K. economy continued to be on track to deliver a solid quarter’s growth at the beginning of 2019, noted Lloyds Bank in a research report. Today’s release of monthly GDP for February indicated the economy grew 0.2 percent sequentially, coming in above expectations of a flat growth outturn and after the 0.5 percent sequential rise seen in January.

On a rolling basis, the economy expanded 0.3 percent in the three months to February, unchanged from January’s upwardly-revised pace. Based on the latest data, even if the economy were to see no growth in March, this would still leave the economy on track to record quarterly GDP growth of 0.5 percent in the first quarter, said Lloyds Bank. This is in contrast with the more-sombre assessment of U.K. activity trends made by the PMIs, which around current levels are in line with the economy stalling in the first quarter.

Delving into detail, most of the upside surprise was because of better-than expected growth in the industrial and construction sectors, which rose 0.6 percent sequentially, and 0.4 percent, respectively, with the service sector growing in line with expectations. Markedly, within industrial production, the largest contribution came from manufacturing which saw a 0.9 percent sequential rise in output in February, a second straight month of solid gains, after a 1.1 percent rise in January. In recent months, the U.K. manufacturing PMI survey has implied that companies have picked up their preparations for Brexit through precautionary stockpiling of both raw materials and finished goods.

“The softening seen in the construction and services PMIs over Q1 suggests that broader economic momentum remains soft, pointing to the likelihood that the economy may slow in the second quarter”, added Lloyds Bank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 32.7326 while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -40.399 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex