UK economy returns to growth; US inflation rises; Haldane to leave BoE – as it happened

Graeme Wearden

from on 2021-04-13 16:15 (#5GGQB)

Rolling coverage of the latest economic and financial news, as the UK economy returns to growth and one of its top central bankers steps down

Latest: BoE chief economist Andy Haldane leaving to run The RSA
Haldane to quit in June

Earlier:

US inflation rate jumped in March
Bitcoin hits record high over $63,000
Economists predict strong UK recovery this year
UK exports to EU partially rebounded..but still lower than a year ago
BREAKING: UK GDP rose 0.4% in February

5.15pm BST

Time for a recap.

The UK economy has returned to growth, as businesses continue to get to grips with the Covid-19 restrictions. UK GDP expanded by 0.4% in February, led by growth at manufacturers and construction firms.

5.00pm BST

South-east Asian super app" Grab, which offers services from ride hailing and food delivery to online banking, is to float in the US in a record deal with a so-called Spac investment company that values the business at almost $40bn (29bn).

Singapore-headquartered Grab, which intends to list on Nasdaq in the US, has struck a $39.5bn merger deal with US-based Altimeter Growth Corp.

4.55pm BST

Cryptocurrency prices are continuing to rally sharply, with bitcoin hitting fresh highs over $63,000 today:

Crypto update:#Bitcoin 63484.80 +5.84%#Ether 2264.39 +5.54%#BitcoinCash 729.29 +8.33%#EOS 7.3210 +12.1%#Stellar 0.6374 +11.22%#Litecoin 267.87 +9.66%#NEO 66.558 +5.81%#Crypto 10 Index 20775 +2.45%#BTC #ETH #BCH #XLM #LTC

4.51pm BST

After a fairly busy day... the UK's leading share index has closed roughly where it started!

The FTSE 100 ended just 1 point higher at 6890, a gain of 0.02%. But within that, there were some notable moves.

4.38pm BST

Becoming chief executive of the Royal Society for Arts, Manufactures and Commerce will allow Andy Haldane to explore issues beyond monetary policy and finance.

That includes the future of work amid rapid technological advances, and the sustainability of modern industry, explains our economics correspondent Richard Partington:

Moving to the RSA is expected to offer Haldane an opportunity to dig deeper into issues outside of monetary policy and mainstream economics, in a prominent job with fewer constraints than as a public servant.

Founded in 1754 with a focus on awarding prizes to new inventions, ideas and artworks, and granted a royal charter by Queen Victoria almost a century later, past fellows of the RSA have included figures such as Charles Dickens, Adam Smith and Karl Marx.

3.56pm BST

Here's a neat profile of Andy Haldane, from last year:

3.55pm BST

Andy Haldane showed his knack of quotability back in 2012, when he gave a speech titled The Dog and the Frisbee" to the annual central banker's gathering in Jackson Hole.

Haldane's point was that increasingly complex regulation developed over recent decades to control the financial markets was sub-optimal for crisis control', as well as being costly and cumbersome.

Catching a crisis, like catching a frisbee, is difficult. Doing so requires the regulator to weigh a complex array of financial and psychological factors, among them innovation and risk appetite. Were an economist to write down crisis-catching as an optimal control problem, they would probably have to ask a physicist for help.

Yet despite this complexity, efforts to catch the crisis frisbee have continued to escalate. Casual empiricism reveals an ever-growing number of regulators, some with a Doctorate in physics. Ever-larger litters have not, however, obviously improved watchdogs' frisbee-catching abilities. No regulator had the foresight to predict the financial crisis, although some have since exhibited supernatural powers of hindsight.

The first is to stay on the back foot and play late. This has the advantage of giving the batsmen more time to get a read on the trajectory of the ball as it swings and darts around. It avoids the risk of lurching forward and then needing hurriedly to reverse course if the first movement is misjudged. This is the way, Joe Root, the Yorkshire and England batsmen, plays his cricket. If he were on the MPC, he'd be called a dove.

But this strategy is not riskless. Playing late relies on having an uncannily good eye and strong nerve. It runs the risk of having to react fast and furiously to avoid missing the ball entirely. An earlier front foot movement would avoid that risk, allowing a more gradual movement forward. This is the way Ian Bell, the Warwickshire and England batsman, plays his cricket. If he were on the MPC, he'd be called a hawk.

Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken.

Friedrich von Hayek once referred to inflation control as akin to trying to catch a tiger by its tail. That metaphor seems apt today. For many years, the inflationary tiger slept.

The combined effects of unprecedentedly large shocks, and unprecedentedly high degrees of policy support, have stirred it from its slumber. In this environment, the tiger-taming act facing central banks is a difficult and dangerous one.

3.05pm BST

Kallum Pickering, senior economist at Berenberg, agrees that Andy Haldane's departure could tilt the MPC slightly more towards the dovish end of the spectrum (away from early interest rate rises).

But still -- if the outgoing chief economist's optimism is proved correct, then the committee will surely respond appropriately to stronger growth and higher inflation, when it comes.

Sterling as well as gilt yields have dipped slightly - although not significantly - on the news, implying that the market judges a slightly more dovish tilt to the MPC once Haldane's leaves. This assessment is broadly right, in our view.

In recent months, Haldane has sounded more optimistic about the UK's economic prospects than the Bank of England's official forecasts. He has also highlighted potential upside inflation risks. Correctly, markets have judged Haldane's stance as more hawkish than the general MPC consensus.

2.50pm BST

Sterling fell slightly against the dollar and the euro following the news that Andy Haldane will leave the Bank of England's Monetary Policy Committee after its June meeting, flags up Reuters.

That's because Haldane has sounded more upbeat about the UK recovery than other MPC members, they explain:

Markets have initially viewed it as the only major hawk leaving the committee, perhaps the only hawk at the moment," James Smith, an economist at ING, said.

His comments about the recovery being particularly fast were not shared by all his colleagues."

Andy Haldane is quitting the 326-year-old Bank of England after more than 30 years to join another institution that's almost as old: the RSA @theRSAorg, founded in 1754 https://t.co/LDPZ4HsiDx

2.38pm BST

Andy Haldane's departure has caused quite a stir in the City.

John Hawksworth, the former chief economist at PwC UK, says it's a big loss for the Bank of England:

Big loss for the Bank, big gain for @theRSAorg

In some ways Andy Haldane has acted more like an external member of the MPC in being prepared to challenge conventional wisdom and, in particular, look to disciplines outside economics for fresh insights. https://t.co/i8U4SoW3qD

So this year the MPC will lose its leading hawk (Haldane in June) and a key dove (Vlieghe in September). Net effect is that the Committee still will lean dovishly later this year, provided the Treasury doesn't appoint some diehard monetarists https://t.co/le1xZT8BHN

Andy Coiled Spring" Haldane to leave Bank of England Chief Economist role for Chief Exec job at @theRSAorg

Significant move.

Haldane's got the highest profile of anyone at the Bank perhaps even including Andrew Bailey - & he came close to being appointed Governor himself last year...

....Also he's been most bullish voice on the Monetary Policy Committee about the UK economy's outlook - his departure will likely leave it with a more dovish complexion...

...He's become a bit of a marmite character in recent years with his headline-grabbing media interventions.

But he's a super smart thinker who made major contributions at the Bank first on financial stability and then in his chief economist role...

....He's certainly had an unusually expansive view of the role of a central banker which has rubbed traditionalists up the wrong way - but he understood the imperative to communicate to a broad public.

Suspect the Bank will miss him and his intellectual energy...

2.29pm BST

Andy Haldane will succeed Matthew Taylor at the RSA (Taylor's departure was announced back in December).

Tim Eyles, RSA chair, says they're delighted to have appointed Haldane, who has been the BoE's chief economist since 2014.

This is a moment of huge historic significance for the world. The challenges presented by Covid, deep-seated inequalities, and Brexit in the UK, require powerful and creative thinking, and the delivery of practical solutions capable of global application. Change must come if lives are to be improved and the planet's future secured.

Andy's extraordinary accomplishments - in his thirty years at the Bank of England, in economic policymaking and academia, in his commitment to people leadership and diversity, equity and inclusion, and in building bridges between experts and citizens, government, business and the third sector - all make him ideally placed to lead the RSA at this critical juncture.

2.12pm BST

Newsflash: Andy Haldane, the ever-quotable Bank of England chief economist, is leaving the central bank this summer.

Haldane will leave in June, to become Chief Executive of the Royal Society for Arts, Manufactures and Commerce, the Bank says.

Andy has worked for the Bank for over thirty years, leading both its financial stability and monetary analysis areas during that time and serving as a member on both the Bank's Financial Policy Committee (FPC) and Monetary Policy Committee (MPC). In addition to his contribution to the Bank, Andy has also led HM Government's Industrial Strategy Council, as well as co-founding Pro Bono Economics, a charity dedicated to using economics to empower the social sector.

Andy will step down from the MPC after its June meeting. He will then take up his post at the RSA in September. The Bank will advertise for a successor to Andy in due course.

Andy Haldane, Chief Economist and member of the Monetary Policy Committee, is leaving the Bank of England to become Chief Executive of the @theRSAorg https://t.co/PHJfneBSwB

1.53pm BST

US consumer prices increased by the most in more than 8 and a half-years in March, points out Bloomberg:

U.S. consumer prices climbed in March by the most since 2012, adding to evidence of budding inflationary pressures as the economy reopens and demand strengthens.

The consumer price index increased 0.6% from the prior month after a 0.4% gain in February, according to Labor Department data Tuesday. A jump in the cost of gasoline accounted for almost half the overall March advance. The median estimate in a Bloomberg survey of economists called for a 0.5% rise.

U.S. inflation rose by more than forecast in March https://t.co/YDRIdVqrUB pic.twitter.com/BY14jx6K8j

US consumer inflation ramped up in March, rising slightly more than expected: +2.6% y-o-y. Core inflation also picked up but still muted: +1.6% y-o-y. The big question: is this a temporary bump due to brief deflation comparison a year ago? Unclear for now: https://t.co/xbmONXGj2q pic.twitter.com/zWUBIVT6aZ

1.44pm BST

US inflation has risen smartly, as higher energy costs drive up the cost of living.

Consumer prices rose by 0.6% month-on-month, pushing the annual rate of inflation up to 2.6%, up from 1.7% a month ago.

BREAKING! US headline #inflation rose to 2.6% in March, higher than expected and the highest level since August 2018. Core #CPI at 1.6% also higher than expected. pic.twitter.com/VWJyvJU2d9

And CPI is out. Consumer prices rose a little bit more than expected for both the headline and core numbers. Another sign that inflation is creeping back into the economy.

March CPI 2.6% vs 2.5% expected YoY
MOM 0.6% vs 0.5% expected
Core Inflation 1.6% vs 1.5% expected

roughly as expected

Inflation data's out. Regular CPI is up 2.6% year over year, in large part because prices were dropping last march. Excluding food and energy, it's up just 1.6%. https://t.co/QBDu9bt1VH

Quick "deep thoughts" about #CPI data?#Fed believes #inflation is transitory. Number won't change that.

Wall Street generally agrees (for now).

Longer-term "meh"-flation/disinflation pressures tied to demographics, structural, debt-driven dynamics, etc. remain in place.

1.29pm BST

Trade experts have been digesting the partial recovery in UK exports to the EU in February, after January's tumble.

Here's some reaction:

February trade for Food and live animal exports to the EU showed a marked improvement from the dire January numbers though year on year estimated February exports are still down 14% vs 2020 and 23% on 2019. The partial recovery, also reflected in the near doubling of Export Health Certificates, highlights that the food industry is learning how to cope with the barriers created by Brexit. However for SMEs, the challenges of exporting small quantities of product remain and for the likes of the shellfish and meat industry, the challenges to export seemingly remain systemic.

These latest figures suggest that UK-EU trade situation improved in February.

In particular, we can see that UK exports to Europe recovered a fair chunk of the early-2021 declines - and remember it is this direction of trade flows that were arguably more heavily impacted by the changes in January (the UK has offered grace periods on many aspects of the new relationship for incoming goods). Imports from Europe stayed depressed, though this is perhaps linked to stockpiling activity during the fourth quarter.

The reality is that exports are much lower than pre Brexit.

That is because exporting to the EU is harder and more expensive. Exports create value for the UK, with lower exports the UK will be poorer.

1.01pm BST

Economic thinktank NIESR has predicted that the UK economy picked up pace in March, and will also grow strongly this month.

Having analysed February's GDP report, NIESR estimates that the economy shrank by 1.5% in the first quarter of 2021 -- less than originally expected.

Despite little change in restrictions, a return to growth in February and upward revisions to January GDP mean that the contraction in the first quarter will be much smaller than anticipated.

Clearly much of the economy has adapted to cope with Covid-19 restrictions: while hospitality was down by over 50 per cent in February on a year earlier, and the arts by over a third, both manufacturing and construction were only 4 per cent smaller in February. Output in public administration, health and energy sectors was higher than a year earlier.

OUT NOW: our latest #NIESRGDP Tracker suggests that #GDP is likely to have fallen by around 1.5% in the first quarter, and a first estimate for Q2 sees growth of 4.6%
Read here our analysis in full
#CovidEconomics #Reopening #vaccinations https://t.co/wn2jpUVNqY

12.48pm BST

Here's our news story on Babcock's restructuring plans:

12.33pm BST

My colleague Georgina Quach has spoken to several UK firms about how they've coped with the pandemic, and the Brexit deal.

AJ Power, which is based in Craigavon, Northern Ireland, manufactures diesel-powered generating sets for sale in international markets -- and has been hit by an onslaught of paperwork and surcharges, she reports:

The [Northern Ireland] protocol created a new trade border with Northern Ireland and the rest of the UK, resulting in additional checks on goods.

It has been a huge problem to us," [chairman Ashley] Pigott said. We have 15,000 production line items - 80% of which originate from mainland Great Britain - that all need to be customs coded."

12.28pm BST

Felicity Lindsay, real estate partner at law firm Gowling WLG, says Goldman Sachs' new Birmingham office is a significant move:

Larger companies especially, still derive a significant level of brand equity in the market from their office buildings, which provide a sense of belonging and community to employees and help to increase innovation and engagement levels.

Such a significant investment in the future of Birmingham's office market particularly, speaks volumes for the likely post-pandemic increase in regional hubs, as an alternative or as a supplement to HQ space in the capital."

12.24pm BST

Here's our economics editor, Larry Elliott, on today's UK trade data:

The government's monthly trade figures come with a health warning - and rightly so. A combination of Covid-19 and Brexit means it is impossible to draw any firm conclusions about the trend from a single month's data.

Look at what has happened to the UK's exports to the EU. These collapsed by a revised record 42% in January but according to the latest figures from the Office for National Statistics subsequently rose by more than 46% in February.

12.03pm BST

Goldman Sachs has announced it will open a new office in Birmingham, widening its UK footprint, in a boost to Britain's second-largest city.

It is set to open in the third quarter of 2021, and will eventually have several hundred staff across a number of divisions.

The build out of an office in Birmingham offers access to a strong and deep new talent pool, excellent academic institutions, a growing technology sector and longstanding leadership in STEM industries.

We are excited to be expanding our UK footprint with a new office in Birmingham. Learn more: https://t.co/iRjx3Ut8Ci

Establishing a new office in Birmingham will diversify our UK footprint and give us access to a broad and deep talent pool in the local area. We see tremendous opportunity to enhance our UK presence and continue delivering for our global clients."

Our Tech sector is set to get even stronger - Go Brum https://t.co/wgvP0pbkes #Birmingham #Tech #Digital

11.31am BST

Investors are now more worried about the risks of higher inflation, taxation changes and a taper tantrum" in the bond market, rather than the Covid-19 pandemic.

That's according to Bank of America's latest Fund Manager Survey, which found that optimism remains very high.

Macro & market optimism among global investors remains very high (taper tantrum, inflation, higher taxation seen as bigger risks than COVID-19, long stocks at 10-year high, long banks at 3-year high); FMS says low wage growth = Q2 bullish risk, disappointing tech/cyclical EPS = Q2 bearish risk.

BofA Fund Manager Survey

"risks & crowds: tail risks...bond tantrum 32%, inflation 27%, higher taxes 15%, COVID 15%, i.e. risks now associated with boom not recession; most crowded trade = long tech; asked if Bitcoin a bubble yes" = 74%, asked are equities a bubble yes" = 7%"

Two-thirds of investors say we're in a late-stage bull market, according to BofA's latest global fund managers' survey pic.twitter.com/IKcwcp7rM0

Fund managers increased their cash allocations as expectations of higher inflation, taxation changes and a taper tantrum" leave equities vulnerable to pullbacks, BofA's April fund manager survey released on Tuesday found.

10.54am BST

In the cryptocurrency world, bitcoin has hit a fresh record high.

#Bitcoin extends gain to 5%, trading at around $63,000.#BTC $BTC

Coinbase is set to go public on Wednesday, and could be valued at as much as $100 billion - more than major trading venue operators like Intercontinental Exchange, owner of the New York Stock Exchange.

Crypto investors are hailing the company's stock market debut as a major milestone for the industry after years of skepticism from Wall Street and regulators.

Bitcoin hits new all-time high above $62,000 ahead of Coinbase debut @Ryan_Browne_ https://t.co/TKcgaZVfZQ

10.27am BST

Economic sentiment in Germany has dropped for the first time since last November, as investors worry about the risk of further Covid-19 restrictions.

ZEW, the economic research institute, has reported that its Indicator of Economic Sentiment for Germany fell this month to 70.7 points, sharply down on March's 76.6.

The financial market experts are somewhat less euphoric than in the previous month.

The ZEW Indicator of Economic Sentiment is, however, still at a very high level and the current situation is assessed much more positively than in March. Fears of a stricter lockdown have led to a decline in expectations for private consumption. Nevertheless, the outlook for exports is better than in the previous month."

Bad news for German business morale: ZEW Economic Sentiment falls in April to 70.7, from previous 76.6 and much less than expected 79.0 @graemewearden

Germany is in the middle of a third wave, so the federal government and the states have agreed to add to the national legislation."

10.05am BST

Britain's economy returned to growth in February despite continuing government Covid restrictions as businesses adapted to lockdown and exports to the EU started to recover after a record plunge in the first month since Brexit.

The Office for National Statistics said gross domestic product (GDP) rose by 0.4% in February from a month earlier as the economy showed some signs of improvement after a revised drop of 2.2% in January.

9.50am BST

Britons' appetite for a takeaway during the latest Covid-19 lockdown led to a near-doubling in orders over the last three months at Just Eat Takeaway.com.

Customers stuck at home across Europe placed 200m orders with the company between January and March. Orders were up 79% compared with the same period a year earlier.

9.49am BST

UK defence firm Babcock International is cutting 1,000 jobs, many in the UK, as part of a restructuring plan.

We are reducing layers of management within the business to form a simpler, flatter structure that will simplify how we operate, improve line of sight, shorten communication lines and therefore increase business flexibility and our responsiveness to market conditions. This will reinforce a one company culture and remove the duplication and lower quality delivery that a siloed approach delivered.

This, unfortunately, will result in headcount reductions. We are also reducing the Group's property portfolio, especially in the UK.

Engineering giant Babcock to cut 1,000 jobs in restructuring. https://t.co/apZEQShd6m

Babcock, which provides maintenance and support for the UK's nuclear submarines at Faslane in Scotland, employs about 27,000 people in the UK out of 30,000 worldwide.

Around 850 jobs in the UK will be lost as part of the company's plan to simplify the business and reduce layers of management.

9.22am BST

The boss of Virgin Atlantic has warned that business travel could suffer a long-term hit from the pandemic.

Will business travel return in the same way? No, I don't think so. But do I think there will be a return to business travel? Absolutely," he [Weiss] said.

Airlines have reported strong demand for leisure trips when borders open and people can travel, but one of the biggest questions facing the industry is how many lucrative corporate clients will be lost forever to remote working and the successful rollout of video conferencing technology.

9.04am BST

Here's another handy thread on February's rise in UK exports to the EU, from trade expert David Henig of the European Centre for International Political Economy (ECIPE).

UK exports to EU partially recovered in February, but food and drink, machinery and chemicals remained somewhat lower than the long run average. Which (one months figures etc) is pretty much what we'd expect. https://t.co/zh27o9nXbH pic.twitter.com/53B5p8RDpV

We have to expect lower trade with the EU as a result of greater barriers. We don't know the level of drop, and won't for some time as there are immediate barriers but also longer term decisions about supply chains to be made by manufacturers.

To note - which is why we need more than a couple of month's data - that stockpile effects may still be seen in from the end of last year, or Feb figures reflect some January orders delivered late. But still essentially consistent with expectation.

8.57am BST

February's UK-EU trade data shows a mixed' picture, says Thomas Sampson, associate professor at the London School of Economics.

He points out that although trade picked up after January, volumes are still much lower than a year ago:

Mixed news for UK trade in February

The good: some bounceback after January's collapse.
EU trade up 20% in Feb-21 vs Jan-21

The bad: Trade still much lower than in previous years. EU trade 12% lower in Feb-21 vs Feb-20
Non-EU trade down only 1% over same period pic.twitter.com/3e13Bcbjoq

Goods exports (excluding precious metals)

Feb-21 compared to Jan-21:
EU: +47%
Non-EU: - 11%

Feb-21 compared to Feb-20:
EU: -12%
Non-EU: -9%

Year to date 2021 vs 2020:
EU: -27%
Non-EU: -7% pic.twitter.com/Y8ojWh1JLL

Goods imports (excluding precious metals)

Feb-21 compared to Jan-21:
EU: +7%
Non-EU: +10%

Feb-21 compared to Feb-20:
EU: -12%
Non-EU: +4%

Year to date 2021 vs 2020:
EU: -15%
Non-EU: -3% pic.twitter.com/jlEQD1ozbE

EU exports by sector for Feb-21 vs Feb-20 (change relative to change in non-EU exports)

Food & Live Animals: -19%
Beverages & tobacco: -26%
Crude materials: -12%
Fuels: -13%
Chemicals: -17%
Material man.: -21%
Machinery: +9%
Miscellaneous man: +11% pic.twitter.com/zYrySXQzt5

Agri-food exports to EU continue to be hard hit. Change in EU exports for first two months of 2021 vs 2020:

Meat: -52%
Dairy & eggs: -39%
Fish & shellfish: -54%
Cereals: -40%
Vegetables & fruit: -47%
Sugar: -49%
Coffee & tea: -31%
Animal feed: -39%
Beverages: -34%

Bounceback in EU exports for agri-food commodities in February, but not enough to offset January's losses

e.g. Fish & shellfish

Jan-21 vs Jan-20: -84%
Feb-21 vs Feb-20: -22%

If Jan decline was only teething problems would expect Feb exports to be higher than in previous years

8.42am BST

The UK's recovery in February was partly due to a rise in exports to the European Union after their dramatic slump in January.

Exports of goods to the EU partially rebounded" in February 2021 (the second month after the Brexit free trade deal began), says the Office for National Statistics, jumping by 46.6% month-on-month, a rise of 3.7bn.

The rise still left UK exports to the EU 15 per cent down on December's level, similar to the level of the Brexit-related drop in trade between the UK and the EU expected in the longer term by the Office for Budget Responsibility.

Exports to the EU were 22 per cent lower than February 2019 levels and imports 26 per cent lower than in the same month two years ago well before the impact of both Brexit and Covid-19 on the figures.

8.35am BST

Jon Hudson, fund manager of Premier Miton UK Growth Fund, also predicts a strong recovery for the UK this year, following the pick-up in growth in February.

The UK economy is still almost 8% lower than where it was last year but a strong bounce back is likely in the second part of this year as restrictions ease and households begin spending the huge level of forced savings they have accumulated over the past year."

8.31am BST

The UK's return to growth in February highlights that businesses adapted to the Covid-19 restrictions, says NIESR, the economic thinktank:

Despite little change in #restrictions, a return to growth in February and upward revisions to January #GDP mean that the contraction in the first quarter will be much smaller than anticipated. Clearly much of the economy has adapted to...

1/3

cope with #COVID19 restrictions: while #hospitality was down by over 50% in Feb on a year earlier, and the arts by over a third, both manufacturing & construction were only 4% smaller. Output in public administration, health & energy sectors was higher than a year earlier..

2/3

If the #vaccine programme and lifting of #restrictions continue on schedule this provides a firm basis for continuing #growth in the second quarter and 2021 overall

Full analysis in our latest #GDP Tracker out shortly - Watch this page

3/3https://t.co/bZNRe8anIT

8.17am BST

Paul Jackson, Global Head of Asset Allocation Research at Invesco, predicts a strong rebound' in April-June, as the UK's covid-19 restrictions are rolled back.

We expect further recovery in the March and April period (note that the British Retail Consortium has just reported that same-store sales were up 20.3% in March versus a year ago, much better than the expected 12.0% gain).

If the February gain is repeated in March, Q1 GDP would decline by 2.6%, after a gain of 1.3% during 2020 Q4. Given the gradual relaxation of lockdown measures, we expect a strong rebound in Q2. Thereafter, we suspect the release of pent-up demand (indicated by a household savings ratio of 16.1% at end-2020 compared to a 2019 average of 6.5%) will generate better than average growth during the second half of the year.

The UK's successful vaccination programme allows the possibility of a return towards normality" within the domestic economy. However, large parts of the global population will remain unvaccinated for some time, which, along with a new wave of infections in many parts of the world (and the prevalence of new Covid variants), suggests the UK may have to maintain some international travel restrictions beyond the end of 2021.

Full normality" is unlikely to be achieved this year.

7.58am BST

Today's GDP report suggests that January was probably the low point of the year, says Thomas Pugh of Capital Economics.

He says the slow climb out of the latest COVID-19 hole began in February; vaccinations and the reopening of the economy should trigger a rapid rebound in activity" over the next few months.

Overall, the third lockdown left the economy in a fairly big hole, although January's decline was revised from -2.9% m/m to -2.2%. And the rise in GDP now leaves the economy 7.8% below the pre-pandemic level compared to our expectations of 8.6% below.

Moreover, with schools having opened in March and outdoor hospitality and non-essential retail stores opening yesterday, the rises in GDP should be much stronger in the coming months. By early next year, we think the economy will have returned to the pre-pandemic level.

7.54am BST

The UK economy's return to growth in February is a welcome sign, says Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International:

After a sobering start to the year, February's GDP figures show a rosier picture. GDP returned to growth in the second month of the year, up 0.4%, adding to expectations that the Q1 downturn won't be as sharp as initially feared.

There is much reason for optimism. Consumers have enthusiastically returned to the high street, glasses have been raised to the opening of outdoor dining and drinking as restrictions ease and the vaccination programme continues at pace. This all points towards a positive direction of travel for the UK economy. The International Monetary Fund (IMF) expects the UK to post 5.3% growth in 2021, and 5.1% in 2022. This would make the UK the fastest-growing G7 country at the end of the forecast period.

7.38am BST

The UK construction sector saw a rise in repair and maintenance (1.9%) and in new work (1.5%) in February.

That lifted overall output up by 1.6% -- but again, the sector is still smaller than before the pandemic, even though builders have kept operating through the current lockdown.

The growth in repair and maintenance was mainly driven by private housing (growing 4.7%). The growth in new work was mainly driven by private commercial (growing 4.0%) and public housing (growing 13.5%).

Previous estimates suggested that construction had recovered to its pre-pandemic (February 2020) levels in November 2020, however, following revisions, the construction sector in February 2021 is 4.3% below pre-pandemic levels.

7.34am BST

UK manufacturing returned to growth in February, for the first time since November.

The ONS says that overall industrial production rose by 1.0%, with the manufacturing sub-sector the largest contributor -- expanding by 1.3% during the month.

7.28am BST

February's GDP report also highlights the ongoing struggles in the services sector, where non-essential shops and hospitality firms were shuttered (until yesterday).

The services sector was 8.8% below its pre-pandemic level in February, having only grown by 0.2% during the month.

7.21am BST

After growing modestly in February, the UK economy is still 3.1% below levels seen in October 2020.

That was the initial recovery peak, before the second national lockdown in November.

7.16am BST

Here's some snap reaction to the GDP report:

#Breaking UK gross domestic product (GDP) grew by 0.4% in February as it rebounded slightly from a 2.2% decline in January, the Office for National Statistics has said

#UK #economy came modestly off its January low in February as GDP rose 0.4% month-on-month (m/m), despite the ongoing lockdown. GDP had earlier contracted 2.2% m/m in January (revised from a previously reported drop of 2.9% m/m). GDP was down 7.8% year-on-year in February

NEW: UK economic growth 0.4% in February despite the ongoing nationwide lockdowns

Shows just how resilient and adaptive the economy has become to the restrictions

7.06am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK economy returned to modest growth in February, but remains sharply below its pre-pandemic peak amid the third Covid-19 lockdown.

GDP grew 0.4% in February but remained 7.8% below its pre-pandemic peak.

Services were up 0.2% (8.8% below), manufacturing up 1.3% (4.2% below) and construction grew 1.6% (4.3% below) https://t.co/oIVcegrojf pic.twitter.com/jks8t62mIF

Commenting on #GDP figures for February, an ONS Spokesperson said: https://t.co/2irdFpXu0a pic.twitter.com/0Lqm3tTFRL

The market reaction to the inflation data will of course depend on the strength of the data, but also on how much investors are ready to buy into Jerome Powell's prediction that higher inflation won't last long enough to compromise the Federal Reserve's (Fed) inflation target of an average of 2%. Jerome Powell will continue repeating that inflation is not an issue in the longer run.

If there is a chance that an acceleration to 2.5% is already priced in, and could be stomached by an average investor, a release above 2.5% could spur panic, and the Fed hawks, push the US yields and the US dollar higher, and send the US stock indices, especially the teck stocks lower. The major US indices closed Monday's session slightly lower, with tech stocks leading losses. Activity on US futures hint that investors do not walk serenely into the data release.

#China trade data in March, chart @BloombergTV https://t.co/YOyJSve2UM pic.twitter.com/yxtNpWoLNy

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