- UK GDP contracts by 0.1% in April after stronger than expected growth in March
- Rising costs due to conflict in the Middle East are beginning to take a toll on the economy
- Over three months the economy grew 0.7%
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“One month’s data would usually be treated with an abundance of caution, but rising prices associated with the conflict in the Middle East are expected to continue putting pressure on a fragile UK economy in the months ahead.
“There had been verdant green shoots at the start of the year, but they came after months of pre-Budget nervousness and increased employment costs which have had a big impact on the labour market. March’s stronger than expected growth seems to have been impacted by businesses bringing forward spending to try and beat expected hikes in costs as the Strait of Hormuz remained blocked.
“Consumers anticipating fresh price increases have already started changing their spending habits. Many are padding out savings pots when they can and cutting back on discretionary spending, a trend that is expected to become more prevalent as the months go on.
“It is hoped that the World Cup, which kicked off yesterday, will give a much-needed boost to the hospitality sector over the coming weeks. But there is a concern that late kick-offs may result in more than a few sick days being taken by workers which could weigh on growth.
“Whilst the Bank of England is expected to hold fire on raising interest rates next week, the housing market has already come under pressure from higher mortgage costs and the bump in growth enjoyed by the construction sector in April came from maintenance and repair work.
“April’s data hints at what is to come, a summer of sluggishness which could edge into a technical recession as global conflict collides with domestic political uncertainty.”
