UK GDP: economy remains at risk of recession

Commenting on this morning’s UK GDP data, Melanie Baker, Senior Economist at Royal London Asset Management said:

“After today’s data, the UK economy looks at increased risk of a technical recession, defined as two consecutive quarters of GDP growth. I expect at least one quarter of negative GDP growth this year.

“All three main areas of output contracted in April – manufacturing, construction and services. It looks like some of the fall in output was driven by things unlikely to persist and the decline in NHS Test and Trace activity was a particular drag on growth. Business surveys were consistent with positive activity growth in April and remain consistent with weaker positive activity growth in May.

“It was also notable that today’s fall in output was not yet driven by consumer-facing services which, overall, rose 2.6% month-on-month in April. However, fundamentals remain challenging in light of high inflation and the cost-of-living squeeze.

“We can already see households saving less and borrowing more which can help shield consumers for a time from the impact of high inflation. We’ve also had a recent package of fiscal measures in the UK that can’t solve the cost-of-living crisis, but should soothe the impact somewhat.”

–ENDS–

The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.