The UK economy stalled unexpectedly in February when strikes crippled the public services but is still likely to perform better than the Bank of England has expected.
ross domestic product was unchanged from January instead of eking out the 0.1pc growth analysts had expected, the Office for National Statistics said Thursday. The figure for January was revised up to 0.4pc.
Together, the readings bring output in the UK above its pre-pandemic level and suggest the economy is unlikely to shrink in the first quarter. That further reduces the risk of a recession but leaves the UK on track for an extended period of stagnation.
"A combination of upward revisions in GDP data and an improvement in global economic conditions could help the UK economy avoid a recession this year," said Yael Selfin, chief economist at KPMG UK. "While this will provide relief for policymakers, the outlook for growth in the medium-term remains relatively weak by historical standards."
Households would continue to be squeezed by higher prices, she said, and the impact of the Bank of England's string of 11 interest rate hikes.
Assuming no revisions, the economy probably grew 0.1pc in the first quarter unless the figure for March shows a contraction of more than 0.2pc, the ONS said. A contraction of 0.6pc would be required for GDP to fall 0.1pc on the quarter, as forecast by the Bank of England.
Chancellor of the Exchequer Jeremy Hunt said the avoiding a recession, largely a result of lower-than-expected energy prices, was a victory for Conservative party policy.
"The economic outlook is looking brighter than expected," Hunt said in a statement. "We are set to avoid recession thanks to the steps we have taken through a massive package of cost of living support for families and radical reforms to boost the jobs market and business investment.
Weak February figures reflect the impact of widespread industrial action during the month. Services output fell 0.1pc, hit by walkouts by teachers and civil servants. Manufacturing, which economists had thought would eek out small growth, also showed no change in the month.
Strike action intensified during the month, with teachers in England staging a national walkout on Feb. 1 in their dispute over pay and regional strikes on other days. Other action involved rail workers, university staff, nurses, paramedics and civil servants.
February also was unusually warm, reducing output from utilities.
Public administration was the second largest contributor, falling by 1.1pc in February 2023. This industry also saw industrial action take place within the civil service during February 2023.
These falls were partially offset by growth in six of the 14 services sub-sectors. The largest contributors to this were human health and social work activities and other service activities, which grew by 0.3pc and 2.0pc respectively.
Despite the fall in the services sector, consumer-facing services grew by 0.4pc in February, driven by retail which expanded at the fastest rate since October. However consumer-facing services are still 8.9pc below their pre-pandemic level, while other services have clawed back losses to be up 2.2pc.