Investing.com — Deutsche Bank expects UK GDP to expand by 0.2% month-on-month in February, following a disappointing January reading, according to the bank’s latest nowcast models released Thursday.
The bank’s economists project broad-based momentum across services, production and construction sectors for February. Deutsche Bank also sees potential for an upward revision to January’s GDP figures.
For the first quarter of 2026, Deutsche Bank forecasts GDP growth of 0.3% quarter-on-quarter, though recent nowcast iterations suggest a slightly weaker print of 0.1% to 0.2% quarter-on-quarter.
The services sector is expected to have picked up after flatlining in January. Deutsche Bank projects transport and storage activity to have jumped 1% month-on-month in February, following a drop in January. Hospitality output is forecast to rise 1% month-on-month, despite the NIQ-RSM Hospitality Tracker showing like-for-like sales down 0.2% year-on-year.
New car registrations rose to 7.25% year-on-year in February from 3.4% in January, which Deutsche Bank expects to offset weaker retail spending. Retail sales volumes fell 0.4% month-on-month in February after a 2% rise in January.
For industrial production, Deutsche Bank expects manufacturing output to increase 0.7% month-on-month in February. The bank’s PMI data showed the diffusion index rising to 52.5, its highest reading since September 2024.
Construction output is forecast to have increased 0.3% month-on-month, though the latest PMI data showed a further fall in output to 44.5.
Looking ahead, Deutsche Bank expects second quarter 2026 GDP growth to slow to 0.2% quarter-on-quarter. The bank forecasts 2026 GDP to expand by 0.7%, with risks skewed to the downside.
The bank cited the fragile Middle East truce and elevated energy prices as factors dampening spending and investment. Oil and gas prices remain well above pre-conflict levels despite retreating from recent highs.