Britain’s economy shrank 1.5% in the three months ending March (when the country was on lockdown) from the previous quarter, according to the Office for National Statistics. It’s not as bad as the 1.7% drop predicted by city economists.
More encouragingly, the economy grew 2.1% in March, the most since August, with the reopening of schools in England and Wales. However, GDP remained 5.9% below its pre-pandemic peak in February 2020 and 1.1% below the initial recovery peak last October.
The service sector advanced 1.9% in March as retail sales continued to strengthen, even before non-essential stores reopened in April. The production sector, which includes utilities, mining and manufacturing, rose 1.8%, with manufacturing output increasing for a second month, 2.1%.
Construction was even stronger with growth of 5.8%, driven by the work undertaken by companies to secure their Covid-19 premises.
Alpesh Paleja, Senior Economist at CBI Group of Companies, said:
While the latest data confirms that the economy was once again hit by a new foreclosure at the start of the year, the decline in activity has been much smaller compared to spring 2020. Households and businesses alike have shifted. clearly better suited to work and live under Covid restrictions, despite the brutal cost of doing so.
A range of indicators, including CBI business surveys, point to a rebound in activity as summer approaches – with the economy opening up and pent-up demand awaiting release. But it is a recovery that will be felt more by some. There is no doubt that the hardest hit sectors and households still have a way to go.
Stocks sold across the world yesterday, haunted by fears central banks must abandon their zero interest rate strategies in the face of rising inflation.
Recent increases in commodity prices have fueled inflation fears, compounded by yesterday’s Chinese factory exit prices for March, which rose 6.8% – an increase of more than 7% since the end of last year and the highest level since November 2017.
In the UK, the FTSE 100 saw its biggest one-day decline since February, closing 175.69 points at 6,947.99 – a drop of 2.47%. It was a similar story on Wall Street, where the Dow Jones also recorded its biggest loss since late February, falling 473.66 points, or 1.36%, to 34,269.16.
The declines continued overnight in Asia, where the Japanese Nikkei fell 1.6% and the Australian market fell 0.7%, while Hong Kong’s Hang Seng edged up 0.15%. European markets are on the right track for a choppy opening.
- 7.45 a.m. BST: Inflation final in France for April (forecast: 1.3%)
- 9h BST: IEA Oil report
- 10 a.m. BST: industrial production in the euro zone for March (forecast: 0.7% month-on-month)
- 10 a.m. BST: speech by Bank of England Governor Andrew Bailey
- 1:30 p.m. BST: US inflation for April (forecast: 3.6%, previous: 2.6%)
- 2 p.m. BST: UK NIESR monthly GDP for April