ING has cautioned that the apparent strength in recent UK economic data may overstate the true health of the economy, arguing that February's sharp rise in GDP is likely distorted by recurring seasonal effects rather than signalling sustained momentum.
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According to the bank's latest analysis, UK output increased by 0.5% month-on-month in February. While strong on paper, ING notes that similar first-quarter surges have appeared repeatedly since 2022, followed by weaker performance later in the year. This suggests the latest figure may reflect statistical noise more than a genuine acceleration in activity.
Economists at ING believe the pattern may stem from the way inflation-related price rises are concentrated in the opening months of the year. If seasonal adjustments do not fully capture these shifts, early-year GDP figures can appear artificially strong. The firm says some of February's improvement aligns with stronger business sentiment indicators earlier in the year, but most of the increase should be treated cautiously.
Looking ahead, ING expects the UK economy to slow through the summer as inflation climbs towards 4% after July. With private-sector wage growth closer to 3%, households could see real incomes fall again, weighing on consumer demand. Higher energy prices are also expected to place additional pressure on businesses and employment levels.
The bank therefore remains unconvinced that the Bank of England will need to raise interest rates in 2026. While acknowledging the decision is finely balanced, ING's central forecast is for the policy rate to remain unchanged at 3.75% throughout the year.
The note highlights a broader challenge facing policymakers: recent headline data may appear resilient, but underlying conditions suggest a more fragile economy shaped by sticky inflation, weaker wage growth, and geopolitical uncertainty.
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