The UK economy grew by a faster-than-expected 0.5% in February, official figures showed, in a boost for the chancellor Rachel Reeves before an expected downturn sparked by Donald Trump’s tariff war.
The increase in gross domestic product in February was larger than the 0.1% that a poll of City economists had forecast, while January’s figure of a modest fall of 0.1% was revised up to zero growth.
However, it could mark the last month of expansion before the impact of the US president’s global trade war – which began in earnest last month with tariffs on Canada, Mexico and steel – began to dampen business investment and consumer spending.
The Office for National Statistics said there was growth across all sectors of the UK economy in February including the manufacturing industry, which bounced back from a long downturn.
Construction, which contracted in January, also recovered to indicate the government’s support for housebuilding was beginning to pay dividends. Within the services sector, computer programming, telecoms and car dealerships all had strong months.
However, the turnaround in the economy may not last. This month, consumers have been hit by inflation-busting utility bill and council tax increases, while employers must cope with £25bn of tax rises.
Simon Pittaway, an economist at the Resolution Foundation thinktank, said the surprise turnaround in fortunes was unlikely to continue into the spring and summer. “It is questionable whether this momentum will last, however, as Britain moves into an era of higher tariffs, and higher economic uncertainty,” he said.
The ONS figures indicated that consumers were more confident about spending despite many surveys that showed households were feeling the weight from shop price inflation over the previous three years.
Services expanded 0.3% on the previous month and consumer-facing services output rose for the fourth month in a row, by 0.7% month on month.
Capital Economics said it was possible the manufacturing sector had benefited from “tariff frontrunning” as companies in the US built up inventories to beat higher import costs.
Industrial production rebounded by 1.5% month on month after a fall in January of 0.5%. A rise of 2.2% in manufacturing from January was driven by a 2.1% increase in metals output, a 1.8% increase in transport equipment and a 4.4% rise in pharmaceuticals output.
Reflecting the boom in air travel as households used their disposable incomes to go on holiday, travel agents and tour operators experienced an 8.1% increase in income in the three months to February on the previous three-month period.