News Item: UK economy shrinks for second month in a row
British economic output declined for a second month in a row in April, weighed down by decades-high inflation, official data showed Monday.
Gross domestic product fell 0.3 percent in April after a drop of 0.1 percent in March, the Office for National Statistics said in a statement.
Output in the services, production and construction sectors fell — “the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021”, the ONS said, as the data added to fears of recession.
The ONS noted that “businesses continued to report the impact of price increases and supply chain shortages”.
The data comes as the Bank of England is set to raise its main interest rate at a fifth straight meeting Thursday in a bid to cool the pace of price rises.
“Despite weakening economic growth, the Bank of England this week is expected to raise rates further as it seeks to get inflation under control,” said Paul Craig, portfolio manager at Quilter Investors.
“While a recession is still a while away, it is looming on the horizon and its effects will begin to be felt in the UK well before we are officially in one.”
Inflation is being fuelled by soaring food and energy prices as economies reopen from pandemic lockdowns and following the invasion of Ukraine by major oil and gas producer Russia.
“Businesses from all sectors are facing unprecedented rises in raw material costs, soaring energy bills, and wage pressures,” David Bharier, head of research at the British Chambers of Commerce, said following Monday’s GDP data.
UK annual inflation stands at nine percent, the highest level in 40 years, causing a cost-of-living crisis for millions of Britons.
In the United States meanwhile, Friday’s forcecast-beating inflation print has triggered expectations that the Federal Reserve will ramp up the pace of its interest-rate increases.
That has sent investors running for cover, with world stock markets tumbling since Friday.