Commenting on this morning’s UK GDP data, Melanie Baker, Senior Economist at Royal London Asset Management said:
“March saw a small contraction in GDP, driven by the retail/wholesale sector but likely reflecting both supply and demand factors. Although the April PMI business surveys still look consistent with relatively robust overall activity growth rates, recession risks have risen for the UK economy.
“The level of GDP stayed above pre-pandemic levels in March. However, consumer-facing services output remains well below pre-pandemic levels, still pointing to an economy operating away from normal patterns of activity.
“It would not be surprising if activity growth struggles in Q2/Q3. The main threat comes from very high inflation rates. Consumer confidence has plunged as real pay growth has deteriorated, driven by stubbornly high inflation including exceptional jumps in energy bills and with wage growth still not keeping up.
“Supply chain problems, labour availability, tighter monetary and fiscal policy, alongside tense UK-EU trade relations, remain challenges for the economy too.”
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.