UK economy smashes forecasts with 0.5% growth in February, but economists fear growth will now slow sharply due to Iran war
February’s GDP report shows “the calm before the storm” that is now hitting the UK economy from the Middle East, reports Sanjay Raja, Deutsche Bank’s chief economist.
Raja says February GDP “smashed expectations” by coming in with “a thumping 0.5%” growth month-on-month this morning.
He says it shows forecasters were too pessimistic about UK growth at the start of the year, and predicts we’ll see decent growth of up to 0.6% in the first quarter of this year.
Our nowcast models now show Q1-26 GDP growth returning back to our original forecast from the start of the year: 0.5-0.6% q/q, reflecting some positive payback after a very sluggish second half in 2025. Given today’s data, spending looks stronger than anticipated. And firms may also be investing more than we thought heading into the Iran conflict.
