The UK economy contracted in April, lacking forecasts, as figures revealed the impact of rising prices on household spending and business activity.
Gross domestic product fell 0.3% between March and April, according to data released by the National Statistics Office on Monday, below the 0.1% increase forecast by economists surveyed by Reuters.
April data confirms that the UK’s economic recovery has stalled, after two months of no growth in the worst combination of rising prices and a lack of economic expansion since the 1970s.
The pound fell 0.4% on Monday against the dollar in London’s first quotations.
UK Chancellor Rishi Sunak said on Monday: “I want to reassure people, we are fully focused on growing the economy to address the cost of living in the long run.
“We have a plan to increase productivity by investing in capital, people and ideas, so that everyone across the country can benefit from a strong and healthy economy,” he added.
Official data showed last month that consumer prices rose at an annual rate of 9 percent in April, the fastest in 40 years and the highest in any G7 country.
Services fell 0.3% and were the main contributors to the fall in GDP in April. The drop reflected a sharp decline, 5.6 per cent, in health and social work, where there was a significant reduction in NHS testing and trail activity.
Production fell 0.6 percent, driven by a sharp contraction in manufacturing, as companies reported the impact of price increases and supply chain shortages.
Construction fell 0.4 percent after solid growth in March, when February storms necessitated repairs and maintenance.
GDP growth is on track to exceed the Bank of England’s growth forecast of 0.1% in the second quarter, said Samuel Tombs, an economist at Pantheon Macroeconomics. However, forecasting the acceleration of inflation, he predicted that the Monetary Policy Committee will raise interest rates by 25 basis points to 1.25 percent when it meets on Thursday.
The Paris-based OECD last week cut its UK growth forecast for 2023 to zero, the lowest in the G20 without Russia, reflecting the impact of high inflation and rising inflation. taxes.