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LONDON, March 10 (Reuters) –
Children returning to school after an illness-ravaged December provided an unexpected, one-off boost to Britain’s economy in January, when growth in output exceeded forecasts, data showed on Friday.
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The Office for National Statistics (ONS) said Britain’s economy expanded 0.3% month-on-month, after a drop of 0.5% in December – a reading that is likely to further allay recession fears.
A Reuters poll of economists had pointed to growth of 0.1%.
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The pound rose against the dollar and euro on the back of the figures, which showed growth was powered entirely by services – much of it due to the one-off bounce in the education sector.
The manufacturing and construction sectors contracted.
“Looking beneath the surface, the figures suggest the economy is on weaker ground than it appears,” Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.
ONS Director of Economic Statistics Darren Morgan said the economy had shown zero growth over the last three months and the past year.
Friday’s data are unlikely to materially change the debate at the Bank of England as it weighs up whether to raise interest rates again at its March meeting.
The chance of a 25 percentage point increase in Bank Rate on March 23 receded slightly on Friday to about 83%, according to
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financial market pricing
, having been at 100% earlier this week.
Britain economy had proved “more resilient than many expected, but there is a long way to go,” said finance minister Jeremy Hunt, who presents his annual budget next week.
The ONS said half of the 0.3% growth rate comprised the education sector, as a result of children returning to school after a significant drop in attendance in December.
The government had previously reported high rates of flu and scarlet fever during December. Fear of contracting COVID-19 over Christmas may also have contributed to children being taken out of school early.
(Reporting by Andy Bruce; editing by William James and John Stonestreet)
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