The UK economy unexpectedly failed to grow in January, indicating that economic activity had stalled even before the conflict in the Middle East could potentially deliver a fresh blow to consumers and businesses.
Data from the Office for National Statistics released on Friday showed that Gross Domestic Product (GDP) remained flat in January compared to the previous month, following a 0.1% increase in December. The January reading fell short of the 0.2% growth forecast by economists.
Growth in the services sector stalled, while manufacturing output rose by a mere 0.1% and construction increased by 0.2%. This suggests the UK economy is already off track from the Bank of England's projection of 0.3% growth for the first quarter as a whole.
However, this forecast, along with projections for the remainder of 2026, now faces uncertainty due to turmoil stemming from the US and Israel's strikes on Iran on February 28th.
Following the data release, the British pound weakened against both the US dollar and the euro. Sterling fell 0.4% against the dollar to 1.3295, while the euro gained 0.1% against the pound to 0.86322.
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