A fast rollout of COVID-19 vaccines has raised hopes of the economy bouncing back this year and in 2022.
The United Kingdom’s economy grew by 0.4 percent in February from January as companies prepared for the lifting of a third coronavirus lockdown, according to official data which also showed a partial recovery in post-Brexit trade with the European Union.
Economists polled by the Reuters news agency had expected growth of 0.6 percent.
However, the data also showed that the fall in gross domestic product (GDP) in January was not as severe as previously estimated, down by 2.2 percent compared with the initial reading of a 2.9 percent drop.
The UK’s economy shrank by almost 10 percent last year, its biggest slump in more than three centuries and a more severe fall than in most European economies, as the country was battered by the coronavirus pandemic.
Tuesday’s data showed GDP remained 7.8 percent below its level a year earlier, shortly before the pandemic swept Europe, and was 3.1 percent lower than its level in October, before the two latest lockdowns hammered the UK’s huge services sector.
Still, a fast rollout of COVID-19 vaccines has raised the prospect of a bounce-back this year and in 2022.
Non-essential shops and outdoor hospitality venues reopened on Monday and Prime Minister Boris Johnson hopes to relax most coronavirus restrictions before the end of June.
“While the UK is still on course for a modest contraction in GDP in the first quarter, investors are increasingly looking towards the forthcoming rebound in economic growth rather than dwelling on the negative quarterly figure,” Dean Turner, an economist at UBS Global Wealth Management, said.
Growth in February was helped by a first rise in factory output since November, led by car manufacturing after two months of contraction when the industry struggled with a global shortage of microchips.
Wholesalers and retailers saw an uptick in sales which helped the services sector to grow by 0.2 percent.
There were signs that trade between Britain and the EU partially recovered in February after a hit in January, the first month of a new post-Brexit trade relationship.
British goods exports to the EU, excluding non-monetary gold and precious metals, were 41.4 percent below year-ago levels in January but partially recovered to be 12.5 percent below year-ago levels in February. Imports, which dropped 19.2 percent on year-ago levels in January, were 11.5 percent below year-ago levels in February.
Trade volumes between Britain and the EU rose in late 2020 as businesses stockpiled goods in anticipation of border delays in 2021.
“Despite the evidence of partial recovery from the substantial January falls in some commodities, it is still too soon to determine to what extent the monthly changes in trade for January and February can be directly attributed to the end of the transition period,” the ONS said.
Early signs of pent-up demand came on Monday when consumers flocked shops that were allowed to open for the first time in almost 100 days along with pubs and restaurants that have space to serve outside.
The return of non-essential shops is the latest stage in a plan Prime Minister Boris Johnson hopes will see all remaining curbs removed by June 21. The first step was the reopening of schools on March 8, and signs show that economic activity picked up in March. A key purchasing-manager index rose well above the 50 level that divides contraction from expansion.
Economists say Britain could experience a consumer boom if only a fraction of excess savings is unleashed, and the Bank of England’s chief economist sees a risk of unwanted inflation.
Falling infection rates and a rapid vaccination program are boosting confidence that the UK can avoid another lockdown. More than 60 percent of adults have been immunized, the most of any major economy.