UK Returns to Growth on Increase Consumer Spending
The United Kingdom (UK )economy returned to growth in April, helped by consumer spending on bars and pubs, alongside higher car sales, offsetting the impact of strike actions initiated by junior doctors, teachers, and civil servants.
Britain’s monthly gross domestic product grew 0.2% in April, reversing a 0.3% slump in March and matching analyst estimates, the Office for National Statistics said Wednesday. The latest monthly figure is now 0.3% higher than the pre-COVID-19 levels.
On a yearly basis, the economy expanded 0.5%, also in line with the consensus forecast and higher than the expected 0.3% growth. In the quarter to April, GDP increased 0.1% compared with the previous three month period.
After logging an output decline in March, the services sector bounced back in April, becoming the UK economy’s top growth contributor for the month. Within the sector, expansion was mainly driven by wholesale and retail trade, repair of motor vehicles and motorcycles, as well as information and communication.
Consumer-facing services also reversed the prior month’s output slump, thanks to increased food and beverage service activities. On the flip side, the performance of the services industry was held back by human health and social work activities due to a four-day strike by junior doctors in April, up from the three-day action in March.
In contrast, the manufacturing sector was the top negative contributor to the UK’s monthly economic performance, with shrinking outputs observed in eight of the 13 sub-sectors. The largest declines were seen in the manufacture of basic pharmaceutical products and pharmaceutical preparations, together with the manufacturing of computer, electronic and optical products.
UK Chancellor Jeremy Hunt welcomed the latest GDP figures, but warned that the government will “stick relentlessly” to its plan of reducing the inflation rate to drive high growth. The Bank of England is due to hold its monetary policy meeting next week, with markets expecting another rate hike given the latest jobs report.
“For the Bank of England, all of this cements a June rate hike and if the inflation numbers continue to come in hot, it’s quite plausible that we end up with an August move as well. Much will depend on how CPI inflation comes out over the next couple of months,” ING wrote on a Tuesday note. The Dutch lender does not see the BoE cutting rates “until this time next year.” #UK Returns to Growth on Increase Consumer Spending