The UK economy contracted in April due to a lack of forecasts, as figures reveal the impact of rising prices on household spending and business activity.
Gross domestic product fell 0.3 percent between March and April, according to data released by the National Bureau of Statistics on Monday, below a 0.1 percent increase forecast by economists polled by Reuters.
April data confirm that the UK’s economic recovery is stagnant as it follows two months without growth in the worst combination of rising prices and a lack of economic expansion since the 1970s.
The sterling fell 0.4% against the dollar at the start of trading in London on Monday.
The Chancellor of the United Kingdom, Rishi Sunak, said on Monday: “I want to assure people that we are fully focused on economic growth to tackle 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, healthy economy,” he added.
Official figures 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 G-7 country.
Services fell 0.3% and were the main contributor to the fall in GDP in April. The decline reflected a sharp decline, by 5.6 percent, in health and social work, where there was a significant reduction in NHS Test and Trace activity.
Production fell by 0.6%, driven by a sharp contraction in production as companies reported the impact of price increases and supply chain shortages.
Construction fell 0.4 percent after solid growth in March, when storms in February necessitated repairs and maintenance.
GDP growth is on track to outpace the Bank of England’s 0.1% growth forecast in the second quarter, said Samuel Tombs, an economist at Pantheon Macroeconomics. However, as inflation is expected to accelerate, he expected the Monetary Policy Committee to 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, with the exception of Russia, reflecting the impact of high inflation and rising levels.
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