"Despite little change in restrictions, a return to growth in February and upward revisions to January GDP mean that the contraction in the first quarter will be much smaller than anticipated."
The data shows that the service sector grew by 0.2% in February 2021, as wholesale and retail trade sales picked up a little but, overall, consumer-facing services industries remain well below pre-pandemic levels.
Output in the production sector grew by 1.0% in February 2021, as manufacturing grew 1.3% following contraction in January.
The construction sector grew by 1.6% in February 2021, driven by growth in both new work and repair and maintenance.
February’s GDP remains 7.8% below the levels seen in February 2020, compared with 3.1% below the initial recovery peak in October 2020.
Latest estimates show that January’s GDP fell by 2.2%, an upward revision from negative 2.9%.
Rory Macqueen, NIESR principal economist, commented: “Despite little change in restrictions, a return to growth in February and upward revisions to January GDP mean that the contraction in the first quarter will be much smaller than anticipated.
"Clearly much of the economy has adapted to cope with Covid-19 restrictions: while hospitality was down by over 50 per cent in February on a year earlier, and the arts by over a third, both manufacturing and construction were only 4 per cent smaller. Output in public administration, health and energy sectors was higher than a year earlier. If the vaccine programme and lifting of restrictions continue on schedule this provides a firm basis for continuing growth in the second quarter and 2021 overall.”
Paul Craig, portfolio manager at Quilter Investors, added: “After an extremely challenging year for the economy, culminating in a 10% knock to GDP over the course of 2020, the first signs of an economic recovery in February are enormously welcome.
“GDP growth over the first quarter of this year will still be down overall after the 2.2% hit to GDP in January caused by the renewal of restrictions, although this has been revised upwards from negative 2.9%. However, the 0.4% increase in economic growth in February presents two big reasons to be cheerful.
“First of all, and despite all manner of headlines since March 2020 proclaiming that many businesses will collapse as a result of the pandemic, this hasn’t materialised in a major way. While some businesses have of course been unable to continue trading, widespread business collapse just hasn’t materialised and UK plc has adapted and survived. With the easing of economic restrictions yesterday, the business environment should only improve from here.
“In fact, it is the service sector that is bearing the brunt of the restrictions with output remaining relatively flat. In contrast, the construction sector grew by 1.6% in February, and the manufacturing sector by 1.3%.
“Second, this adds to the feeling that we are finally on the ‘irreversible’ path back to normality and full economic re-opening. Alongside the vaccine rollout running on track, the R-rate is coming down and the potential for herd immunity is finally becoming a realistic prospect.
“Economic success going forward hinges on not falling back into another wave and further restrictions, while encouraging consumers who may be flush with cash to go out and spend to ensure the recovery is self-fulfilling and does not hit a brick wall. Once more, the end of the furlough scheme and other support measures must not present too big a bump in the road to disrupt the path back to economic growth."
