UK economy returns to weak growth as pub spending boosts output | Economic growth (GDP)

[ad_1]

Britain’s economy returned to growth in April, as rising car sales and customer spending in pubs and bars helped production recover from a wave of public sector strikes the previous month.

The Office for National Statistics said on Wednesday gross domestic product edged up 0.2% month-on-month, matching city economists’ forecast for a recovery from March, when production fell by 0.3%.

Fueled by an increase in consumer spending in the country’s dominant service sector, the rise in activity was partly offset by a decline in output in the health sector, which was affected by strikes by young doctors . Activity also fell in computer manufacturing and the pharmaceutical industry.

The ONS has warned there are signs of stress emerging amid a sharp monthly drop in building activity. Under pressure from rising interest rates and falling property values, he said homebuilders and real estate agents had a bad month.

The latest snapshot comes amid growing expectations that the Bank of England will raise interest rates for the 13th consecutive time next week from its current level of 4.5% in response to stubbornly high inflation, adding to the pressure on already reeling households and businesses. rising borrowing costs for decades.

Economists said April’s return to growth could be interpreted by Bank policymakers as a sign that higher interest rates have not yet dampened demand enough to reduce inflationary pressure.

Kitty Ussher, chief economist at the Institute of Directors, said: Households responded to improving weather in April by increasing their discretionary spending levels, even in the face of rising costs.

Tuesday’s figures showed activity in Britain’s labor market was stronger than expected in April, with wage growth hitting the highest level on record outside of the Covid pandemic. Inflation fell less than expected in April to 8.7%, the highest level in the G7, fueling expectations of a rate hike.

The facts remain that families are feeling worse off, facing a skyrocketing Conservative mortgage penalty and lagging behind on the world stage, said Rachel Reeves, the shadow chancellor.

Despite our country’s enormous potential and promise, today is another day in this Conservative government’s sad low growth record book.

More broadly, GDP rose 0.1% in the three months to April, lifting the UK economy slightly above pre-pandemic levels. However, analysts have warned that the recovery in activity is unlikely to last, thanks to higher interest rates affecting the purchasing power of mortgage holders.

Ruth Gregory, deputy chief UK economist at Capital Economics, said the consultancy estimated that more than 60% of the slowdown in the economy due to rising borrowing costs had yet to be felt. . Financial markets also expect the Bank to raise rates by more than one percentage point from the current level of 4.5%.

That’s why we still think a recession is on the way in the second half of this year, she added.

skip newsletter promotion

Subscribe to Business Today

Get ready for the working day, we’ll bring you all the business news and analysis you need every morning

“,”newsletterId”:”business-today”,”successDescription”:”We’ll send you Business Today every weekday”}” clientOnly>Privacy Notice: Newsletters may contain information about charities, advertisements online and third-party funded content. For more information, see our privacy policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply.

after newsletter promotion

At the end of last year, economists feared the UK was now in recession. However, falling global energy prices and growing consumer confidence helped support activity. The economy grew 0.1% in the first quarter, matching the performance of the last three months of 2022.

Revised figures last week showed the eurozone slipped into a mild recession at the turn of the year, after two straight quarters of GDP contraction. The US economy grew 0.3% in the first quarter, after growing 0.6% in the fourth quarter of 2022.

Jeremy Hunt, the Chancellor, said the International Monetary Fund predicted Britain’s economy would grow faster than Germany, France and Italy from 2025. But high growth requires low inflation, we we must therefore relentlessly stick to our plan to halve the rate this year to protect family budgets.

However, business leaders warned there was little to celebrate, with the growth rate close to zero. The economy continues to ride out of recession, said David Bharier, head of research at the UK Chambers of Commerce.

Other upcoming changes to trade with the EU, such as new reporting requirements and import fees, will also add further pressure on exporters, many of whom have seen their business decline due to the rising trade barriers.

[ad_2]