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UK GDP grows 0.3% in January, better than 0.1% forecast
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One-off surge in education sector boosts output
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Reflects kids returning to school after illness-hit Dec.
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Manufacturing and construction decline
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Readings unlikely to sway Bank of England rate debate much
(Adds comments from Prime Minister Sunak, Labour Party)
By Andy Bruce and William Schomberg
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.
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, at least in the short term.
A Reuters poll of economists had pointed to growth of 0.1%.
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 entertainment sector - helped by the men's soccer
Premier League returning to action after the 2022 World Cup -
was another fillip for the economy.
In a sign of deeper problems for the economy, manufacturing
and construction 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.
Martin Beck, chief economic advisor to the EY ITEM Club
forecasting group, said widespread strikes in December and
January likely explained why the economy remained below its
level in November.
The ONS said economic output in January stood 0.2% below its pre-pandemic level of February 2020 - in contrast to other advanced economies - and 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 financial market pricing, from 100% earlier this week.
CLASSROOM ECONOMICS Prime Minister Rishi Sunak said the fundamentals of Britain's economy were strong, adding that his finance minister Jeremy Hunt would announce more details about the government's economic plans in his upcoming annual budget.
Hunt looks set to keep his grip on the public finances
in Wednesday's budget, refraining from big tax cuts or spending
increases until the next election comes closer into view.
The opposition Labour Party, ahead of Sunak's Conservatives
in the opinion polls by a wide margin, said the data showed the
economy was only "inching along" amid a wider trend of managed
decline.
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.
Education represents 6% of Britain's economy and student
numbers are the main way the ONS measures the quantity of
service the sector provides.
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GRAPHIC-UK's growth card GRAPHIC-Return to school after sickly December boosts UK GDP ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Andy Bruce, graphics by Sumanta Sen and Andy
Bruce; editing by William James, John Stonestreet and Christina
Fincher)
