- UK GDP grew 0.3% in January, beating forecasts of 0.1%
- Temporary surge in education sector boosts production
- It reflects children returning to school after being hit with illness in December.
- Decline in manufacturing and construction
- Not likely to make a big impact in the Bank of England interest rate debate
LONDON (Reuters) – Children returning to school from the coronavirus pandemic in December provided an unexpected temporary boost to the UK economy in January, with output growth beating expectations. higher, Friday’s data showed.
The UK economy expanded 0.3% month-on-month after falling 0.5% in December, according to the Office for National Statistics (ONS). This is likely to further ease recession fears, at least in the short term.
A Reuters poll of economists showed growth of 0.1%.
Against the numbers, the pound rose against the dollar and the euro. This shows that growth is entirely service driven. Much of this is due to a temporary recovery in the education sector.
The entertainment sector, fueled by the resumption of the men’s football Premier League after the 2022 World Cup, has become another vital force for the economy.
Manufacturing and construction contracted in a sign of more serious problems for the economy.
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“Beneath the surface, the numbers show the economy is weaker than it appears,” said Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.
Martin Beck, chief economic adviser to the EY ITEM Club forecasting group, said the widespread strikes in December and January likely explained why the economy remained below that level in November. said.
According to the ONS, economic output in January was 0.2% below pre-pandemic levels in February 2020 and, in contrast to other advanced economies, has seen zero growth over the past three months and the past year.
Friday’s data are unlikely to materially change the Bank of England’s argument as it considers whether to raise interest rates again at its March meeting.
According to financial market pricing, the chances of a 25% rise in bank rates on March 23 have dropped slightly from 100% earlier this week to around 83% on Friday.
The UK economy has “proven to be more resilient than many expected, but there is still a long way to go,” said Chancellor of the Exchequer Jeremy Hunt, who will announce the annual budget next week.
Hunt looks set to stay in control of finances with Wednesday’s budget, with no major tax cuts or spending increases until the next election is in sight.
Half of the 0.3% growth is made up in the education sector as a result of children returning to school after a significant drop in enrollment in December, according to the ONS.
The government had previously reported high rates of influenza and scarlet fever in December. Fears that she might catch COVID-19 at Christmas may also have contributed to the children leaving school early.
Education accounts for 6% of the UK economy and student numbers are the primary way ONS measures sector output.
Reporting by Andy Bruce.Edited by William James, John Stonestreet and Christina Fincher
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