GDP growth in February likely overstates economy’s true strength

GDP reading: GDP rose 0.5% on a seasonally adjusted month-on-month basis in February, following a 0.1% increase in the prior month. February's reading was the strongest since January 2024 and beat market expectations by a wide margin.

Drivers: Key growth drivers were mining, energy, construction, admin and support services, and wholesale plus retail.

Panelist insight: Caveating the latest data, ING’s James Smith said: “If it sounds too good to be true, then it probably is. That’s our initial reaction to the apparent surge in UK GDP in February, up 0.5% month-on-month. It’s consistent with a trend which dates back to 2022, where growth has tended to come in much stronger in the first quarter than over the rest of the year. We suspect this can be traced back to the period of higher inflation and the tendency of price hikes to be geared towards the first few months of the year, something which doesn’t appear to be fully adjusted for in the seasonal adjustment and/or deflation process.”

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