The UK economic system unexpectedly contracted in March for the primary time this 12 months, pushed particularly by providers and manufacturing, as households brace themselves for a tighter value of dwelling squeeze.
Gross home product declined 0.1 per cent between February and March, information printed by the Workplace for Nationwide Statistics confirmed on Thursday, under the no change forecast by economists polled by Reuters.
It follows stagnation within the earlier month, elevating issues over the tempo of the restoration. Inflation is ready to speed up from its 30-year excessive as vitality prices have soared following Russia’s invasion of Ukraine.
Over the primary quarter as an entire, the UK economic system expanded 0.8 per cent over the earlier three months, boosted by stronger progress in January. Nevertheless, that was under analysts’ expectations of 1 per cent and down from the 1.3 per cent improve within the earlier quarter.
Exercise within the providers sector slipped 0.2 per cent on the month and was the principle contributor to March’s fall in GDP, with the motor business significantly laborious hit.
Manufacturing additionally fell on the month by 0.2 per cent; these falls have been partially offset by development, which grew by 1.7 per cent.
Samuel Tombs, economist at Pantheon Macroeconomics, expects GDP to contract by 0.4 per cent within the second quarter as well being spending declines and shoppers tighten their belts. The Financial institution of England forecasts the economic system to alternate between close to stagnation and contraction over the following two years, with output barely modified by the primary quarter of 2024.
Regardless of the weak financial outlook, markets anticipate the BoE to lift its rate of interest from the present 1 per cent to 2 per cent by the top of the 12 months.
