The UK economy contracted by 0.3% in April
Breakdown: The UK economy contracted in April for the second month in a row.
GDP fell 0.3% in April, adding to the 0.1% drop in March, with services, production and construction falling in April.
The National Statistics Office reports that the reduction in NHS testing and tracking activity weighed on the economy, while supply chain problems affected factories.
The ONS says:
- Services fell 0.3% in April 2022 and were the main contributors to the fall in GDP in April, reflecting a sharp decline (5.6%) in human health and social work. , where there has been a significant reduction in NHS testing and tracking activity.
- Production fell 0.6% in April 2022, driven by a 1.0% drop in manufacturing in the month, as companies continue to report the impact of price increases and supply chain shortage.
- Construction also fell 0.4% in April 2022, following strong growth in March 2022, when there was significant repair and maintenance activity following the storms experienced in the second half of February 2022.
- This is the first time that all major sectors have contributed negatively to a monthly GDP estimate since January 2021.
Monthly GDP of the United Kingdom M / M (April): -0.3%, exp: 0.1%, previous: -0.1%
Monthly GDP of the United Kingdom 3M / 3M (April): 0.2%, exp: 0.4%, previous: 0.8%
– Michael Hewson 🇬🇧 (@mhewson_CMC) June 13, 2022
Updated at 07.08 BST
Completion of the free trial of Covid-19 means that April’s UK GDP figures would always look “worse than reality,” says ING’s James Smith.
But … this pandemic spending also gave an “artificial” boost to GDP in previous months, making the economy look stronger.
Smith explains:
Free trials of Covid-19 were stopped the previous month and, according to the ONS, this meant a 70% drop in testing and tracing activity. Pandemic-related health spending fell 0.5 percentage points from GDP growth in April.
And if we eliminate it, the 0.3% drop in monthly GDP should actually have been marginally in growth territory.
In short, just as health-related spending gave an artificial boost to GDP levels last year, helping the economy appear to be recovering to pre-virus levels faster than it really was, these categories now make the picture look superficially worse.
Photograph of UK GDP: ING / ONS
Chancellor Rishi Sunak says the UK is not the only one to see a slowdown …
“Countries around the world are experiencing slow growth and the UK is not immune to these challenges.
“I want to reassure people, we are fully focused on growing the economy to address the cost of living in the long run, while supporting families and businesses with the immediate pressures they face.”
Environment Secretary George Eustice has admitted that there are “some real challenges ahead” after the UK economy shrank in April.
Eustice was asked by Sky News if it was time for the government to “stop maintaining that this is the fastest growing economy in the G7” after GDP fell 0.3% in April.
He cited the recovery from the pandemic and supply chain pressures as the cause of the fall.
“We have known for a long time that this would be a challenge.
“We have unemployment that is at an all-time low, the lowest it has been since 1974, but of course there are some real challenges ahead and these GDP figures are a reminder of those challenges.”
The NHS Test and Trace and COVID-19 vaccination program reduced 0.5 percentage points of GDP growth in April 2022, the ONS explains:
This was driven by further falls in NHS test and trace numbers, which fell by 70%, reflecting changes in COVID-19 testing policy in England from April.
Vaccination programs grew 71% year-on-month due to the spring reinforcement campaign.
BUT: GDP would have grown by 0.1% had it not been for the liquidation of Test & Trace
– Andy Bruce (@BruceReuters) June 13, 2022
April’s UK GDP report is weaker than expected, says Andy Bruce of Reuters …
Economist Jumana Saleheen agrees that it is a negative surprise:
Monthly UK GDP data this morning show that the economy contracted in * April * GDP -0.3% m / mIP -0.6% m / m
Analysts expected a small contraction (given the weakness of leading indicators such as PMIs). But today they had a negative surprise. pic.twitter.com/wfGyylPaZL
– Jumana Saleheen (@JumanaSaleheen) June 13, 2022
This graph shows how services, production and construction in the UK were contracted in April, the first time the same month has passed since the Covid-19 January 2021 blockade.
Photography: ONS
Updated at 07.41 BST
Work: Falling GDP is “really worrying”
Shadow Labor Chancellor Rachel Reeves tweets that the 0.3% drop in GDP in April is “really worrying”:
NEW: GDP figures show that the UK economy contracted by 0.3% in April.
Really worrying.
Instead of addressing structural weaknesses, all the conservatives have to do is stick gypsum.
The work will create a stronger and more secure economy, increasing our energy security, supply chain and business security.
– Rachel Reeves (@RachelReevesMP) June 13, 2022
The TUC accepts:
GDP figures are seriously worrying. April is down 0.3% month-on-month, after falling 0.1% in March. The ONS warns: “This is the first time that all major sectors [manufacturing, construction and services] have contributed negatively to a monthly GDP estimate since January 2021 “. pic.twitter.com/2hY1rnuxiV
– TUC Economy and Social Affairs (@TUCeconomics) June 13, 2022
KPMG: Fall in production is unlikely to be short-lived
The fall in GDP in April shows that the UK economy could shrink in the current quarter, putting it on the brink of recession.
Yael Selfin, chief economist at KPMG UK, says:
“The overall outlook remains low as consumer revenue pressure is expected to weaken demand and external winds are intensifying due to the deteriorating outlook among the UK’s main trading partners.
“The rest of the second quarter could see a further drop in GDP due to weakening momentum and the impact of extended bank holidays.
“UK GDP fell 0.3% in April, partly as a result of falling Covid-related healthcare spending, but also due to further supply chain disruptions and weakness of demand “.
The April contraction means that the UK economy is now only 0.9% bigger than before the first Covid-19 blockade in the spring of 2020, as this chart shows:
Photograph of UK GDP: ONS
Darren Morgan, director of economic statistics at the ONS, explains that the reduction in testing and tracking and rising business costs caused the economy to shrink in April:
“A sharp drop in the healthcare sector due to the liquidation of the testing and tracing scheme pushed the UK economy into negative territory in April.
“Manufacturing also suffered with some companies telling us that they were being affected by rising fuel and energy prices.
“These were partially offset by growth in car sales, which recovered from a significantly weaker-than-usual March.”
Updated at 07.21 BST
The UK economy contracted by 0.3% in April
Breakdown: The UK economy contracted in April for the second month in a row.
GDP fell 0.3% in April, adding to the 0.1% drop in March, with services, production and construction falling in April.
The National Statistics Office reports that the reduction in NHS testing and tracking activity weighed on the economy, while supply chain problems affected factories.
The ONS says:
- Services fell 0.3% in April 2022 and were the main contributors to the fall in GDP in April, reflecting a sharp decline (5.6%) in human health and social work. , where there has been a significant reduction in NHS testing and tracking activity.
- Production fell 0.6% in April 2022, driven by a 1.0% drop in manufacturing in the month, as companies continue to report the impact of price increases and supply chain shortage.
- Construction also fell 0.4% in April 2022, following strong growth in March 2022, when there was significant repair and maintenance activity following the storms experienced in the second half of February 2022.
- This is the first time that all major sectors have contributed negatively to a monthly GDP estimate since January 2021.
Monthly GDP of the United Kingdom M / M (April): -0.3%, exp: 0.1%, previous: -0.1%
Monthly GDP of the United Kingdom 3M / 3M (April): 0.2%, exp: 0.4%, previous: 0.8%
– Michael Hewson 🇬🇧 (@mhewson_CMC) June 13, 2022
Updated at 07.08 BST
The cost of living crisis has dragged business optimism to its lowest point in more than a year, accounting firm BDO reports this morning.
BDO’s optimism index fell 4.82 points to 101.93, the second consecutive month of decline, as leaders worry about continued inflationary pressure and supply chain disruption in the coming months .
BDO partner Kaley Crossthwaite said:
“The fact that business optimism is now at the same level as it was more than a year ago while the country was still experiencing coronavirus restrictions paints a worrying picture for the UK economy.
“The weakness of consumer purchasing power is certainly weighing heavily on companies and will continue to slow growth in the coming months.”
CBI warns UK government over Northern Ireland protocol
Richard Partington
The CBI has warned the government that its threat to overturn the Northern Ireland protocol is forcing companies to rethink investing in Britain and dragging the economy.
Tony Danker, director general of the IWC, said reaching an agreement was in the best interests of the UK economy as businesses and households struggle with rising cost of living and the imminent risk of recession .
“I don’t think it’s time for size; I think it’s time to make a deal. I strongly believe that Europeans are being inflexible. At the same time, our measures, which may come on Monday, to take unilateral measures in response are not helpful. “
The head of the lobby, which represents 190,000 companies across the UK, said renewed Brexit uncertainty over the protocol dispute was hurting the UK economy and causing some companies not to invest in the UK.
Legislation empowering ministers to repeal parts of …