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  • Writer's pictureanalysiswatch

Title: UK economy shrinks in March as recession risks mount

May 12, 2022 07:36AM ET

By: AnalysisWatch

Britain's economy unexpectedly contracted in March, ending a weak first quarter of the year threatened by recession and increasing pressure on the government to provide more support to inflation-hit households.

The statistics office said gross domestic product fell 0.1% in February due to a slump in car sales caused by problems in the supply chain.

This brought growth for the first three months to 0.8%, weaker than the Bank of England forecast of 0.9% and the median forecast of 1.0% by economists polled by Reuters.

The government is under pressure to provide more support to households. Rishi Sunak said that while the recovery is being disrupted by Russia's invasion of Ukraine, he is prepared to offer further help as regulated energy tariffs are expected to rise by around 40% in October.

The UK economy grew faster than the US and Eurozone economies in the first quarter, although this was partly due to the earlier start and end of the COVID-19 omicron wave and differences in the timing of energy price rises.

Much of the UK recovery reflects increased spending on health care (11% since the start of the pandemic), while consumer services are still at 7% below pre-pandemic levels.

In March alone, car and motor vehicle sales fell by 15.1%, leading to a 0.2% fall in total services output.

The decline in GDP would have been even steeper had it not been for an unusually strong 1.7% increase in construction output as a result of repairs following February's winter storms.

February GDP growth was revised from 0.1% to zero.

The world's fifth-largest economy contracted by 9.3% in 2020 and grew by 7.4% in 2021, the largest output swing of any G7 economy. Total GDP is now 1.2% higher in February 2020 on a monthly basis than before COVID.

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