U.K. Economy Slowed Again in April

By Geoffrey Smith — The U.K. economy contracted in April, with output dropping across all major sectors as a leap in household energy bills and fuel prices combined with other one-off factors.

Gross domestic product for the three months through April grew only 0.2% after 0.8% in the previous three-month period, with industrial production falling 0.6% on the month and manufacturing output falling by 1.0%, the Office for National Statistics said. The ONS’s index of service activity indicated that the sector stagnated during the period.

In April alone, the ONS estimated that GDP fell by 0.3%, with manufacturing, services and construction all declining simultaneously for the first time since January 2021. As a result, GDP is now only 0.9% above its pre-pandemic level.

Economists had predicted a rise of 0.4% in quarterly GDP.

The data are the latest to show the effects of a sharp rise in regulated household energy bills during April, which immediately cut the amount consumers had available to spend on other goods and services, as well as having a similarly depressing effect on consumer confidence.

In addition to the energy price shock, there were other – arguably less serious – short-term factors contributing to the drop. The ONS said that the drop in construction output was driven largely by a drop in repair work, which had surged in March after severe storms in February. In addition, the drop in services output was colored partially by a drop in Covid test-and-trace activity as the pandemic ebbed.

The pound, which had already been under pressure against the dollar after the latest inflation overshoot in the U.S. pushed the dollar higher across the board on Friday, fell another half a cent on the dollar to a one-month low of $1.2238 before stabilizing to trade at $1.2247 by 2:55 AM ET (0655 GMT).

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