All three main sectors, services, industrial production and construction, declined as GDP contracted for the second straight month
All three main sectors, services, industrial production and construction, declined as GDP contracted for the second straight month, according to the Office for National Statistics (ONS).
The economy unexpectedly slumped 0.3 percent in April amid the cost-of-living crisis, new figures show.
The shock slump was followed by a 0.1 percent drop in March as households continued to grapple with rising energy and food costs.
Monday’s announcement of a contraction in GDP is worse than economists had predicted, with a 0.1 percent rise in April from some City analysts.
The Bank of England has warned of a “sharp economic slowdown” amid fears the UK could slide into a recession, calculated as two consecutive quarters of contraction in GDP.
The latest ONS analysis shows services contracted 0.3 per cent in April, the main reason behind the overall contraction in UK GDP.
Manufacturing fell 0.1 percent and construction fell 0.4 percent.
Manufacturing and construction also fell 0.6 percent and 0.4 percent respectively, marking the first time since January 2021 that all major sectors have contracted.
Overall GDP, which is the most important indicator for the development of the economy, collapsed by 0.3 percent.
The unexpected contraction on Monday morning sent the pound down 0.5 percent against the dollar to its lowest level since May 2016.
The drop in GPD in April was largely due to the “significant reduction” in the government’s Covid testing and tracing programme, the ONS said.
Rising fuel prices, which hit drivers and companies at the pump, also contributed to the decline in economic output.
Economists polled by Reuters had predicted GDP would rise 0.1 percent in April.
ONS Director of Economic Statistics Darren Morgan said: “A sharp contraction in the healthcare sector due to the suspension of the testing and tracing system pushed the UK economy into negative territory in April.
“Manufacturing also suffered from some companies telling us they were being impacted by rising fuel and energy prices.
“These were partially offset by growth in auto sales, which rebounded from a significantly weaker-than-usual March.”
Confederation of British Industry (CBI) chief economist Rain Newton-Smith said rising inflation would make many households feel as if the UK was already in recession.
she said Sky news on Monday morning: “We expect the largest drop in household incomes on record.
“And as a result, consumption and household spending are likely to contract every quarter for the next four quarters.”
The war in Ukraine is having a “devastating” impact on the global economy as rising energy and commodity prices add global pressure on Britain, Ms Newton-Smith said.
Samuel Tombs, UK chief economist at Pantheon Macroeconomics, predicts the economy as a whole will contract between April and June but still believes the UK will escape a full-blown recession.
Commenting on Monday’s figures, Chancellor Rishi Sunak said: “Countries around the world are slowing growth and the UK is not immune to these challenges.
“I want to reassure people that we are fully focused on growing the economy to help manage the cost of living longer term while supporting families and businesses with the immediate strains they are facing.”
Environment Secretary George Eustice admitted that “we have some real challenges ahead of us”, adding that “these GDP numbers are a reminder of those challenges”.
The Bank of England has warned that inflation could hit more than 10 per cent, five times its target, by the end of 2022.