UK GDP contracted by 0.3% in April, representing the second consecutive month of decline after the 0.1% fall in March, according to the latest data from the Office of National Statistics (ONS).
The report confirmed services fell by 0.3% in April this year, which was the major contributor to the slide in GDP over the month, and reflected a significant decrease of 5.6% in human health and social work, which was linked to a substantial drop in NHS track and trace activity.
The GDP figures also took into account a 0.6% fall in production, driven by a 1% decline in manufacturing as a growing number of businesses continued to report the impact of price increases and supply chain shortages.
The ONS mentioned that construction declined by 0.4% after a strong growth in March, when there was notable repair and maintenance activity as a result of storms in the second half of February 2022.
The latest figures reportedly marked the first time that all main sectors contributed negatively to monthly GDP estimates since January 2021.
The report reflected the impact of the Ukraine conflict, with the prices of everything from labour to fuel rising rapidly on the back of Russia’s war in the region.
Inflation has seen consumers scale back on their spending as families guard their wallets while inflation continues to bite chunks out of them.
“Confidence is shaky, inflation is taking a big bite out of consumers budgets and businesses are caught between the devil and the deep blue sea. Hike their prices and lose sales or offer discounts and watch margins wither,” said AJ Bell financial analyst Danni Hewson.
Analysts have also highlighted that the Bank of England is almost certain to raise its interest rates an additional 0.25%, marking a jump to 1.25% as investors brace for a potential recession later in the year.
“With just days to go before the Bank of England makes its next rate decision there will be plenty of debate about how best to curb searing levels of inflation whilst still providing a “soft landing”. Is recession an inevitability at this point?” said Hewson.
“With the OECD’s warning still ringing in the ears there’s plenty to be concerned about. Russia’s invasion of Ukraine has seriously set back Covid recovery plans around the world but a backdrop of reduced trade, rising taxes and a price cap creating artificial energy peaks, the UK has particular problems.”
Meanwhile, the Sterling slid in light of the report, with the Pound to Euro exchange rate dropping one third to 1.1664 and the Pound against the Dollar falling 0.5% to 1.2217.