Economy stagnates in January

GDP reading: GDP stagnated on a seasonally adjusted month-on-month basis in January, following 0.1% growth in the prior month. January’s reading was below market expectations.

Drivers: Services showed no growth, while industrial production declined by 0.1% and construction increased by 0.2% in January.

Panelist insight: On the latest data and near-term outlook, ING’s James Smith said: “These figures do have a habit of bouncing around, and realistically the economy is probably recording modest growth right now. Certainly, if you look at a three-month average of monthly GDP, the narrative looks a little better. Remember, too, that the UK growth figures have a suspicious habit of coming in stronger through 1Q than the rest of the year. This is a trend that began in 2022, and we suspect is linked to the period of higher inflation and the tendency of price hikes to be geared towards the first half of the year, something which may not be being fully adjusted for in the seasonal adjustment and/or deflation process. In other words, don’t rule out a strong bounce back in February or March – this is exactly what happened last year after a similarly weak January.”

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