UK GDP increased by 0.5% in February, surpassing the forecast of 0.1%. The prior figure of -0.1% was revised to 0.0%.
Services output rose by 0.3%, exceeding the expected 0.1%, with the previous figure updated from 0.1%. Industrial output saw a jump of 1.5%, while manufacturing output grew by 2.2%, both surpassing expectations.
Uk Economic Resilience
Construction output increased by 0.4%, against an anticipated 0.0%. The revisions indicate a moderate resilience in the UK economy, particularly in the services sector.
The latest monthly data indicate a stronger rebound in economic activity than nearly all forecasters expected. February’s overall figure shows a half-percent expansion in GDP, which is five times the growth rate that had been anticipated. The earlier print for January, initially described as a mild contraction, was also quietly reassessed — upgraded from a negative reading to flat growth. That adjustment alone reduces the recent sense of economic stagnation. Together, these two months paint a picture of an economy that, while not moving at an eye-watering pace, is certainly not idling either.
Services, which make up the lion’s share of output, delivered a clear beat on forecasts. A 0.3% rise instead of the pencilled-in 0.1% matters not just in size but because this sector tends to act as a bellwether for broader sentiment and consumer activity. The upward revision to January means the sector didn’t just avoid a dip; it actually carried forward momentum into the new year. This comes after a choppy period in which growth has been patchy and confidence uneven.
More striking, however, is the resurgence in industrial and manufacturing output — typically areas that lag when rates are high and demand is soft. A 1.5% increase in industrial production paired with a 2.2% gain in manufacturing suggests stronger than expected order books and production schedules. It’s not just that companies eked out year-end gains; they appear to be ramping up activity ahead of what could be a more favourable period for exports and domestic demand alike.
In construction, too, we see upside. Although a 0.4% gain might sound small, especially in a sector known for sharp movements, it came against a forecast of no change at all. So, the take-away is not just that builders are busy — it’s that forecasters had presumed stalling, but instead found a mild pick-up in work activity.
Sector Surges And Economic Impact
Clarkson noted this better-than-expected momentum across sectors, and it aligns with a short-term recovery narrative we’ve been watching for. The adjustment to prior figures also helps iron out some disconnect that had built up between underwhelming economic predictions and more robust business surveys.
Traders focused on rates and volatility will now need to re-align their positioning with an economy that isn’t drifting sideways as many had assumed. February’s figures won’t push central banks decisively in one direction or another, but they do turn down the volume on recession talk — which in turn tightens the range of scenarios being priced into the front end.
Fitzgerald commented on the sheer breadth of the upside surprise — not a single sector posted a negative surprise relative to consensus, which is an uncommon pattern in monthly data. The message is clear: forecasting models that bet too heavily on cyclical softness may be getting caught on the wrong foot.
For those running directional or volatility-driven positions, this presents a moment to step back and check for any misalignment between macro exposure and the actual data flow. Economic beats like this tend to compress duration-sensitive trades, especially in the run-up to major data releases or rate-setting meetings. As such, hedging short-end risk or skewing exposure toward relative value between industrial-heavy regions and consumer-heavy ones may now offer more reliable edges.
While short-term clarity might seem tempting, we shouldn’t misinterpret the revisions and upside beats as evidence of an unstoppable upswing. They merely reduce the downside tail, which matters more for pricing forward curves than anything overtly directional.
In this context, Martin’s reference to services resilience takes on specific importance: if the largest component of output is steady, smaller sector surges can filter through with clearer effects, which lowers the background noise for model-based traders.
We are now entering a stretch when one or two more beats could finally reset Q1 expectations in standard macro models. Until that happens, option markets could under-price realised volatility if traders assume reversals are imminent. A more sustained divergence between expectations and releases would argue for taking flatter structures or widening collars around forward GDP-linked risk.
There’s no need to panic, but complacency about softness can no longer be the base case. Instead, we should be preparing for a scenario in which resilience is quietly being mispriced.
