In data highlighting the growing risk of recession, the Office for National Statistics said Gross Domestic Product (GDP) fell 0.3% month-on-month, after falling 0.1% in March, as consumers cut spending increasing household energy bills. Reducing the government’s Covid vaccination program and pandemic testing and detection was the biggest contributor to the monthly decline. If this effect is ruled out, the economy is likely to grow, although analysts have warned that there were signs of weakness elsewhere, as shortages of basic materials and rising costs are driving the business. “[Monthly GDP] “It was not as weak as it looks, but it does increase the chances of the economy slipping into recession,” said Paul Dales, chief economist at Capital Economics. City economists had forecast moderate growth of 0.1%. Growth in the quarter to the end of April approached 0.2%. The most recent snapshot showed that the three main sectors of the British economy – the services sector, industrial production and construction – shrank for the first time since January 2021 during the national lockdown. Manufacturing suffered as companies struggled with rising fuel and energy prices and international supply chain problems, reducing industrial production by 0.6%. Construction also fell 0.4 percent, following strong growth a month earlier, as builders took advantage of significant repair activity following the storms in February. Production at consumer services increased by 2.6% per month, reflecting rising spending on hairdressing and food services. However, the industry remained below pre-pandemic levels as an indication of significant business losses during downtime and restrictions. The figures come amid growing concerns about the strength of the economy as Boris Johnson’s government battles Conservative divisions for the best way to deal with stagnant growth and rising cost of living. Rachel Reeves, the shadow chancellor of the Labor Party, said: “These figures are extremely worrying and will add to the concerns that families continue to feel about their own finances and the long-term health of our economy. “Instead of tackling the structural weaknesses and insecurity they have created, what the Conservatives are using is sticking plaster.” Chancellor Risi Sunak said the government had a plan to boost the economy and support people with rising living costs. “Countries around the world are seeing a slowdown in growth and the United Kingdom is not immune to these challenges,” he said. Despite pressure from households on record growth in gas and electricity bills in April, pushing inflation to its highest level since the 1980s, ONS said retail sales rose in the month. Analysts said the economy was in a stronger position than the data suggest due to the significant contribution of the NHS testing and detection service. “If we subtract that, the 0.3% drop in monthly GDP should actually have been marginal in the growth area,” said James Smith, an economist at City bank ING. The ONS said test-and-trace was down 0.5 percentage points from GDP growth in April as the government cut activity, based on estimates of service costs if given a market price. “Just as health-related spending artificially boosted GDP last year, helping the economy appear to be recovering faster than it actually did, these categories now make the picture look better. “Superficially worse,” Smith added. . However, business leaders warned that the overall outlook remained weak as rising inflation weighed on households and companies as pressure on exporters intensified as the Northern Ireland Protocol intensified. Subscribe to the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk Despite trade concerns as the government enacts legislation to circumvent parts of the protocol, threatening retaliation from Brussels, total exports of goods, excluding precious metals, rose 2, 2.2 billion to the highest population-adjusted level since December 2020. Total imports increased by around 400 400 million £ due to the increase in goods arriving from EU countries. Barret Kupelian, a senior economist at PwC accounting firm, said UK economic output had returned to November levels after falling in recent months. “Economic data is now fast approaching the cocktail of challenges facing businesses and consumers, namely the war in Ukraine, high food and energy inflation and the possibility of further supply chain disruptions due to trade tensions with the EU.” he added.
