By Andy Bruce and William Schomberg
LONDON (Reuters) - Britain's economy stagnated in February as strikes by public workers hit output but a bounce in January was stronger than first thought, meaning a recession is a bit less likely to be brewing in early 2023, official data showed.
Economic output was flat in month-on-month terms in February, against the consensus forecast for a 0.1% increase in a Reuters poll of economists.
But the Office for National Statistics (ONS) revised up its estimate for January's growth to 0.4% from 0.3% - meaning Britain is likely to avoid the first-quarter contraction that the Bank of England predicted last month.
The bigger picture remains weak. While sidestepping recession for the time being, Britain's economy has stagnated over the last year.
International Monetary Fund projections published this week showed Britain bottom of the world's major economies in terms of expected economic growth in 2023, with a 0.3% contraction pencilled in, equivalent to a 0.7% fall on a per capita basis.
Suren Thiru, economics director at accountancy body ICAEW, said recession fears would linger as higher taxes and borrowing costs offset the fall in inflation and government support for energy bills.
"These figures suggest that the economy has lost momentum as sky-high inflation and strike action continue to drag on key drivers of UK GDP, notably services and industrial production," Thiru said.
He said the BoE should end its run of interest rate hikes next month as raising rates would further weaken the country's growth prospects.
The ONS said the vast services sector contracted by 0.1% in February, hurt by strikes by teachers and other public sector workers, but was offset by a surge in the much smaller construction sector which rebounded from bad weather in January, the ONS said.
The upward revision to January means the economy would need to have shrunk by 0.6% in March for the first quarter as a whole to show a contraction.
Finance minister Jeremy Hunt said the data showed Britain's economic performance had been stronger than thought.
Thursday's figures showed a 2.4% surge in construction output - which represents around 6% of the economy - was the sole driver of economic growth in February.
ONS officials attributed the jump in construction output to a recovery in February from disruption caused by bad weather in January, especially in new work, and a surge in maintenance and repair work.