Britain’s economy shrank 0.1% in March as inflation and the Ukrainian war were sacrificed

The UK Economy It shrank in March as rising living costs and the war in Ukraine hindered recovery from the pandemic.

Experts warned that a plunge in household income meant a problem with the future of the economy and increased the risk of a recession.

Official figures show that the economy grew 0.8% between January and March, down from 1.3% growth in the last three months. but, GDP It fell 0.1% in March, just 0.7% above pre-pandemic levels. National Bureau of Statistics (ONS) said.

Exports fell by 3% in real terms between March and February, 14.6% below the 2018 average, according to trade data released Thursday.

The numbers serve as another economic warning sign for Prime Minister Rishi Sunak, after other data show that retail sales slowed and consumer confidence plummeted in April.

Real disposable income is projected to decline by £ 1,200 per household this year, the largest decline in living standards since the equivalent record began in 1956.

Despite the dire outlook, the prime minister has so far resisted calls to provide more financial support to those who are struggling to cover the soaring bills and the high costs of essentials, including food. ..

Darren Morgan, director of economic statistics at ONS, said growth in the last three months was the lowest in a year.

“Our latest monthly estimates show a slight decline in GDP (gross domestic product) in March, resulting in a decline in both service and production.”

Economic growth in the first quarter of this year was driven by hospitality, transportation and travel agencies as consumers returned to their pre-pandemic shopping habits. Construction was also favorable due to repair work after the storm in February.

Yael Selfin, chief economist at KPMGUK, said the outlook for the UK economy is becoming more and more uncertain and the risk of a recession is increasing.

“Since the second quarter of this year, rising energy tariffs and rising costs of groceries and other commodities due to the conflict in Ukraine have put more pressure on consumers and pushed up their living expenses.

“At the same time, borrowing costs have increased due to tighter financial conditions and rising interest rates.”

The Bank of England raised interest rates to 1% last week to curb inflation spikes. Inflation is expected to peak at 10.25% later this year. A sharp rise in prices means that the real income of millions of people will fall because wages cannot keep up.

Snack admitted that these were “uneasy times,” but said the UK economy was growing faster than the United States, Germany and Italy.

“Our recovery is hampered by Putin’s barbaric invasion of Ukraine and other global challenges, but we continue to help people as much as we can,” he added.

“Growth is the best way to help families in the long run, investing in capital, people and ideas to not only ease the imminent pressure on households and businesses, but also to raise the standard of living in the future. . “

Economists have warned the prime minister that his recent tax increases and failure to continue financial support hinder economic recovery and risk putting the country in recession.

The Bank of England predicts that the UK economy will be little larger in 2025 than in 2020. In the fourth quarter of this year, households are expected to experience even more significant energy price increases, shrinking the economy and running out of the rest. Money to spend elsewhere.

Ed Monk, associate director of Fidelity International, said the latest data show that the World Bank could fall into recession sooner than expected.

“The UK is facing a serious fight this year to avoid a recession,” he said. “Soaring energy, fuel and food prices continue to dig into households, and some already have to choose from basic necessities, but this is unlikely to be the end of squeezing.”

Shadow leveling secretary Lisa Nandhi said the money was “sucked out of the community,” amid the slowdown in growth seen in Thursday’s GDP figures.

She told the BBC breakfast: “We have to get the money back in people’s pockets. We need to get the money back to the local community, or you’ll see we have 10 years It’s just that people simply can’t use it.

“Every pound you put in the pockets of working people is returned to the local economy, and the Conservative government consistently prioritized tax cuts over putting money in the pockets of working people for very wealthy people. Because. ”

New trade data show that Brexit continues to hurt UK exports. The UK import-export gap widened from the revised £ 9.6 billion in February to £ 11.2 billion in March.

Since last year, the sharp rise in gas costs has boosted imports, further boosted by Russia’s invasion of Ukraine.

With the exception of volatile prices, the UK’s trade deficit has widened to a record high.

On a cash basis, exports were similar to the levels recorded in 2018 before the Brexit uncertainty and pandemic. However, after removing the effects of recent inflation, commodity exports fell 3% in March, well below the 2018 average by 14.6%.

“This means that UK exporters have lost significant market share since the UK left the EU,” said Gabriella Dickens, senior UK economist at Pantheon Macroenomics.

“”[Exports] High inflation will continue to struggle as global consumer demand is eased and Brexit continues to limit the ability of exporters to acquire business from EU customers. “

Britain’s economy shrank 0.1% in March as inflation and the Ukrainian war were sacrificed

Source link Britain’s economy shrank 0.1% in March as inflation and the Ukrainian war were sacrificed

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