Employers’ group wants ‘vital actions’ to avoid inflation-fueled recession
The UK economy unexpectedly contracted 0.3% in April, after contracting 0.1% in March, according to the latest figures from the Office for National Statistics, or ONS.
The country’s finance minister, Chancellor of the Exchequer Rishi Sunak, played down the second straight month of contraction saying the UK had been hit by global issues including the novel coronavirus pandemic, the Russian- Ukraine and the resulting high cost of fuel and energy. , and supply chain shortages – which have conspired to push prices up at the fastest rate in 30 years.
“Countries around the world are experiencing slowing growth, and the UK is not immune to these challenges,” he said, as quoted by the BBC. “I want to reassure people, we are fully focused on growing the economy to meet the longer term cost of living, while supporting families and businesses through the immediate pressures they face.”
But Rachel Reeves, the UK’s Shadow Chancellor of the Exchequer, said: ‘These figures are extremely worrying and will add to the concern that families still feel about their own finances and the long-term health of our economy.”
Sky News said the Confederation of British Industry, which is the UK’s largest employers’ group, said the shrinking economy requires “vital action” from the government in order to avoid an inflation-fueled recession.
The ONS said April’s economic slowdown was the first time that all major parts of the economy – the service sector, manufacturing and other forms of production – had shrunk at the same time since January 2021.
It was the first time the economy had contracted for two consecutive months since the start of the pandemic.
However, talking about a recession remains premature because an economy is only considered in recession after two consecutive quarters of economic contraction. The three-month quarter ending April 30 actually saw growth, albeit by a meager 0.2%.
With recession still looming at least six months away, Paul Dales, chief economist at consultancy firm Capital Economics, told The Guardian newspaper: “(monthly GDP) was not as weak as it It looks like it, but it nevertheless increases the chances of the economy slipping into recession.”
April’s lackluster performance surprised analysts, who had expected growth of 0.1%.
The ONS said the sharp and unexpected economic contraction in April had been significantly affected by the end of the National Health Service’s test and trace programme.
Darren Morgan, director of economic statistics at the ONS, said: “A sharp decline in the health sector due to the end of the test and trace program pushed the UK economy into negative territory in April.”
The ONS said people were also hesitant in April to pay higher prices for produce and also dented their travel spending; all of the factors that have rattled the UK’s gross domestic product, or GDP.
In addition, shortages of essential raw materials have weighed on economic activity, with industrial production down 0.6%, construction down 0.4% and even the 2.6% growth in services for to consumers disappointing compared to pre-pandemic levels.