UK Economy Stagnates in April Due to Adverse Weather Conditions and Reduced Production
This year signifies a sluggish recovery for the UK economy, as it slipped into a technical recession at the end of 2023 following two consecutive months of negative growth.
In April, the UK economy remained stagnant due to heavy rainfall and adverse weather conditions impacting production and growth output.
Real GDP for the month of April showed no growth compared to a 0.4 percent increase in March.
While services output saw a 0.2 percent rise in April, the production and construction sectors faced a less favorable outlook.
Inclement weather, particularly strong winds and storms, had a notable impact on industries such as retailers, construction, and food and beverages.
Construction experienced a 1.4 percent decline in April, marking a third consecutive monthly drop. Additionally, the sector fell by 2.2 percent in the three months up to April.
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In the production sector, there was a 0.9 percent decline in April, contrasting with a 0.2 percent growth in the preceding month.
The drop in production was mainly led by a 1.4 percent decrease in manufacturing. On the flip side, water supply, mining, electricity, and gas supply sectors contributed positively to the production figures.
Need for Growth
The lack of growth in April poses a challenge for the government ahead of the upcoming general election in July.
For the Conservatives, economic growth, inflation reduction, and national debt decrease are the top three priorities leading up to the July election. Similarly, economic stability is a primary focus for the opposition.
UK business leaders emphasized the need for the new government to shift focus from managing economic shocks post the COVID-19 pandemic and global conflicts to driving growth.
Following two consecutive months of negative growth at the end of 2023, the UK entered a technical recession, highlighting the struggle of the Conservative government in achieving GDP growth.
Although the recovery has been slow, the government managed to lower inflation from its peak almost two years ago to 2.3 percent in March.
Despite Downing Street’s optimism about the economy, concerns arose from subsequent wage growth and labor market data pointing to persistent inflation.
Economic Outlook
Given the wage growth outpacing inflation and the stagnant economy in April, the Bank of England (BoE) is likely to refrain from cutting interest rates in the upcoming week.
Members of the BoE’s Monetary Policy Committee, responsible for setting interest rates, will consider the latest inflation figures before their meeting on June 20.
Chief UK economist at Pantheon Macroeconomics, Rob Wood, noted that the ONS growth data further complicates the BoE’s interest rate decision.
“Rate-setters are expected to maintain rates in June, with a rate cut in August appearing less probable now,” stated Mr. Wood.
Deputy chief economist at abrdn, Luke Bartholomew, highlighted the volatility of monthly GDP data but suggested that trends over several months could offer a clearer perspective.
Mr. Bartholomew anticipates the UK economy to continue its recovery in 2024, with households benefiting from robust real income growth amidst decreasing inflation.
Commenting on the April GDP figures, the Resolution Foundation described Britain as “in the slow lane,” attributing flatlined productivity since 2008 to potential wage stagnation.
Addressing the long-term economic forecast, the foundation mentioned that average wages are £14,400 below the pre-financial crisis trajectory.
PA Media contributed to this report.
