Official figures showed, today, Monday, that the British economy unexpectedly contracted in April, raising fears of a slowdown, three days before the Bank of England announced the size of its latest response to interest rates in the face of rising inflation.
The UK’s GDP (Gross Domestic Product) contracted by 0.3% compared to March. Economists polled by Reuters on average expected Britain’s gross domestic product to grow 0.1 percent in April compared to March.
This is the first time since January last year that all major economic sectors contribute negatively to the monthly GDP.
However, GDP could have grown by 0.1% excluding the impact of reducing government coronavirus testing, tracing and immunization programmes, according to the British Office for National Statistics (ONS).
In the three months to April, GDP rose 0.2%, a sharp slowdown from the 0.8% growth rate recorded in the three months to March. A Reuters survey indicated growth of 0.4 percent in the period from February to April.
“Many respondents reported that higher production costs have affected their business,” the Office for National Statistics said.
Some economists, before Monday’s data, said they had expected the April increase in national electricity prices and the tax hikes paid by workers, introduced during the month, would not affect monthly GDP data through May.
British Finance Minister Rishi Sunak said that Britain is not alone in facing the impact of high inflation and the repercussions of the Russian invasion of Ukraine.
“Countries around the world are experiencing a slowdown in growth, and the UK is not immune to these challenges,” she said in a statement.
However, the Organization for Economic Co-operation and Development said last week that Britain’s gross domestic product will grow 3.6% this year before stopping at 0.0% next year, the lowest forecast by 2023 among all G-20 countries except Russia.
Despite the slowdown, the Bank of England on Thursday is expected to raise interest rates for the fifth time since December.
The central bank expected inflation to exceed 10% in the last quarter of the year, five times its target.
Most investors and economists expect another quarter-point rate hike this week.
Trade data released separately by the National Statistics Office showed the impact of sanctions on Russia, with exports to the country dropping to the lowest monthly value since January 1999, and imports to the lowest since March 2004.
(Reporting by William Schomberg and Andy Bruce; Editing by Kylie McClellan; translated by Flora Gomez)
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