UK economy shrank 0.3% in April, fueling slowdown worries – business live | Company


Britain’s economy shrank 0.3% in April

Breaking: Britain’s economy contracted in April for the second consecutive month.

GDP fell 0.3% in April, adding to a 0.1% decline in March — services, production and construction all falling in April.

The Office for National Statistics reports that reduced NHS Test and Trace activity has weighed on the economy, while supply chain issues have hit factories.

ONS says:

  • Services fell by 0.3% in April 2022 and were the main contributors to the decline in GDP in April, reflecting a sharp drop (5.6%) in human health and social work, where there was a significant reduction in NHS Test and Trace activity.
  • Production fell 0.6% in April 2022, led by a 1.0% fall in manufacturing over the month, as companies continued to report the impact of price hikes and supply chain shortages .
  • Construction also fell 0.4% in April 2022, following strong growth in March 2022, when there was significant repair and maintenance activity following storms in the second half of February. 2022.
  • It is the first time that all major sectors have contributed negatively to a monthly GDP estimate since January 2021.

Monthly UK GDP M/M (April) act: -0.3%, exp: 0.1%, prev: -0.1%

Monthly UK GDP 3M/3M (April) act: 0.2%, exp: 0.4%, prev: 0.8%

— Michael Hewson 🇬🇧 (@mhewson_CMC) June 13, 2022

KPMG: the fall in production should not be short-lived

The fall in GDP in April shows that the British economy could contract in the current quarter, putting it on the verge of recession.

Yael Selfin, chief economist at KPMG UKsaid:

“The overall outlook remains bleak as squeezing consumer incomes are expected to weaken demand, and external headwinds are intensifying due to deteriorating prospects among the UK’s major trading partners.

“The remainder of the second quarter could see a further decline in GDP due to weakening momentum and the impact of the extended holiday.

“UK GDP fell 0.3% in April, partly due to a drop in Covid-related healthcare spending, but also due to further supply chain disruptions and weakening of demand.”

April’s contraction means the UK economy is now just 0.9% larger than it was before the first Covid-19 lockdown in spring 2020, as this graph shows:

UK GDP Photography: NSO

Darren Morgandirector of economic statistics at the NSOexplains that the end of test and trace and rising business costs led to a contraction in the economy in April:

“A sharp drop in the healthcare sector due to the end of the test and trace program pushed the UK economy into negative territory in April.

“The manufacturing sector has also suffered, with some companies telling us they were being hit by rising fuel and energy prices.

“These were partially offset by growth in car sales, which recovered after a significantly weaker than usual March.”

Britain’s economy shrank 0.3% in April

Breaking: Britain’s economy contracted in April for the second consecutive month.

GDP fell 0.3% in April, adding to a 0.1% decline in March — services, production and construction all falling in April.

The Office for National Statistics reports that reduced NHS Test and Trace activity has weighed on the economy, while supply chain issues have hit factories.

ONS says:

  • Services fell by 0.3% in April 2022 and were the main contributors to the decline in GDP in April, reflecting a sharp drop (5.6%) in human health and social work, where there was a significant reduction in NHS Test and Trace activity.
  • Production fell 0.6% in April 2022, led by a 1.0% fall in manufacturing over the month, as companies continued to report the impact of price hikes and supply chain shortages .
  • Construction also fell 0.4% in April 2022, following strong growth in March 2022, when there was significant repair and maintenance activity following storms in the second half of February. 2022.
  • It is the first time that all major sectors have contributed negatively to a monthly GDP estimate since January 2021.

Monthly UK GDP M/M (April) act: -0.3%, exp: 0.1%, prev: -0.1%

Monthly UK GDP 3M/3M (April) act: 0.2%, exp: 0.4%, prev: 0.8%

— Michael Hewson 🇬🇧 (@mhewson_CMC) June 13, 2022

The cost of living crisis has driven business optimism to its lowest level in more than a year, accounting firm BDO reports this morning.

The BDO optimism index fell 4.82 points to 101.93, the second straight month of declines, as bosses 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 over a year ago when the country was still under coronavirus restrictions paints a worrying picture for the UK economy.

“Weakening consumer purchasing power is undoubtedly weighing heavily on businesses and will continue to dampen growth in the months ahead.”

CBI warns UK government against Northern Ireland protocol

Richard Partington

Richard Partington

The CBI has warned the government that its threat to override the Northern Ireland Protocol is forcing businesses to think again about investing in Britain and dragging down the economy.

Tony Danker, chief executive of the CBI, said reaching a deal was in the interest of the UK economy as businesses and households grapple with soaring costs of living and the looming risk of recession.

“I don’t think it’s time to get noticed; I think it’s time to make a deal. I firmly believe that Europeans are inflexible. At the same time, our steps – which could come on Monday – to take unilateral action in response are of no use. »

The head of the lobby group, which represents 190,000 businesses across the UK, said renewed uncertainty over Brexit sparked by the protocol dispute was hurting the UK economy and leading some businesses not to invest United Kingdom.

Legislation giving ministers the power to override parts of the Northern Ireland Protocol is due to be published in the House of Commons on Monday afternoon.

Intro: UK GDP report due as CBI warns of recession risks

Hello and welcome to our ongoing coverage of business, the global economy and financial markets.

We are set to get another health check on the UK economy this morning with the release of the April GDP report.

The data, due at 7am BST, comes as Britain could head into recession as the cost of living crisis hits households and businesses.

Analysts fear the report will show a weak economy.

Alvin Tan of RBC Capital Markets Defines the scene:

Today’s April GDP release in the UK will capture the direct impact on production of the end of the UK’s Covid test and trace programme. We believe this will subtract about 0.6ppt from GDP growth m/m in April.

Even allowing for some growth in private sector activity, we still see monthly GDP growth of -0.4%. We currently expect stable GDP growth for the second quarter as a whole, but a larger than expected contraction in April would be difficult to recover in the following months given the June holidays.

And here Michael Hewson of CMC Markets:

The latest GDP figures for April are expected to show a weak economy battered by the sharp rise in energy prices, with the services index expected to rise 0.1%, after falling -0.2% in March.

The overall monthly figure, which posted a -0.1% decline in March, will be lucky if we show any growth in April, while on a quarterly basis we can expect a decline of 0.8%. % to 0.4%.

The CBI, which represents British business, is today calling on the government to get the economy under control, warning that British households will fall into recession this year.

It has revised down its forecast for GDP growth to 3.7% in 2022 (from 5.1% previously) and 1.0% in 2023 (from 3.0% previously).

He also fears that household spending will decline next year amid falling business and consumer confidence.

General director Tony danking said the Prime Minister and Chancellor must take urgent action to support growth, including supporting business investment and tackling labor shortages in sectors such as aviation.

Let me be clear – we expect the economy to be roughly flat. It won’t take much to tip us into a recession. And even if we don’t, it will be one for too many people.

“Times are tough for businesses facing rising costs and for low-income people anxious to pay their bills and put food on the table.

Fears of a wider recession are also stirring markets, after the US inflation rate hit a new 40-year high of 8.6% on Friday.

That sent stocks in Europe and Wall Street tumbling late last week, and Asia-Pacific markets followed – with the Japanese Nikkei down nearly 3%.

European stock markets are expected to suffer further losses today:

Agenda

  • 7am BST: UK GDP report for April
  • 7am BST: UK trade balance for April
  • 11am BST: Monthly NIESR GDP tracker for May
  • 1pm BST: India’s inflation rate for May

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