2nd June 2022
Data released by the Office for National Statistics (ONS) revealed that the economy shrank by 0.3% in April following a fall of 0.1% in March; this was the first contraction in two consecutive months since the start of the pandemic. April’s figure was also much weaker than analysts had been expecting, with the consensus forecast from a Reuters poll of economists predicting
a growth rate of 0.1%.
ONS said a key driver behind April’s decline was a ‘significant reduction in NHS Test and Trace activity.’ It also noted some ‘common themes’ reported by firms across different industries,
with many saying increases in the cost of production and supply chain shortages had affected their business.
Commenting on the UK’s economic outlook the same day as the GDP figures were published, CBI Director General Tony Danker said the business group was “expecting the economy to be pretty much stagnant” and that “it won’t take much to tip us into a recession.”
More recent survey data from S&P Global’s closely watched Purchasing Managers’ Index also suggests the economy is showing signs of stalling. While the preliminary headline figure for June was unchanged at May’s 15-month low of 53.1, the index measuring new orders fell to 50.8, the weakest growth rate for over a year, with manufacturing order books dipping below the 50.0 growth threshold to 49.6.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “The economy is starting to look like it is running on empty. Current business growth is being supported by
orders placed in prior months as companies report a near-stalling of demand. Business confidence has now slumped to a level which has in the past typically signalled an imminent recession.”