February’s development exhibits UK in all probability on “a stronger footing” than anticipated earlier than vitality shock
February’s GDP report exhibits “the calm earlier than the storm” that’s now hitting the UK financial system from the Center East, reviews Sanjay Raja, Deutsche Financial institution’s chief economist.
Raja says February GDP “smashed expectations” by coming in with “a thumping 0.5%” development month-on-month this morning.
He says it exhibits forecasters had been too pessimistic about UK development at the beginning of the yr, and predicts we’ll see first rate development of as much as 0.6% within the first quarter of this yr.
double citation markOur nowcast fashions now present Q1-26 GDP development returning again to our unique forecast from the beginning of the yr: 0.5-0.6% q/q, reflecting some optimistic payback after a really sluggish second half in 2025. Given immediately’s knowledge, spending seems stronger than anticipated. And companies may be investing greater than we thought heading into the Iran battle.
However the affect of upper vitality costs, and weaker enterprise funding, will damage development this yr, he provides:
double citation markThe excellent news is that the UK seemingly entered the vitality shock on a stronger footing than many anticipated. Q1-26 GDP development will seemingly hit greater than double the quarterly fee many forecasters anticipated, additionally lifting annual GDP development projections. The dangerous information is that upward GDP momentum received’t final. It will seemingly be the expansion earlier than the vitality squeeze.
Households could have already began to really feel the affect of the Iran vitality shock, impacting disposable incomes and discretionary spending. Pump costs are up over 20% for the reason that oil shock occurred. And twin gasoline payments are as a consequence of rise by an identical quantity over the summer time. Companies will even seemingly be pulling again funding plans, hiring plans, and reducing wage development because of this. As such, count on extra sluggish development into Q2-26 (and past).”
Share
Up to date at 03.04 EDT
Key occasions
Please activate JavaScript to make use of this function
Tesco warns earnings may fall amid Iran warfare uncertainty
Sarah Butler
Tesco has warned that earnings may fall again within the yr forward amid “elevated uncertainty brought on by the battle within the Center East”.
Support Greater and Subscribe to view content
This is premium stuff. Subscribe to read the entire article.
