LONDON (CNBC) - Britain’s economy unexpectedly shrank in April, official figures showed on Monday, adding to fears of a sharp slowdown just three days before the Bank of England announces the scale of its latest interest rate response to the surge in inflation.
Gross domestic product contracted by 0.3% after falling by 0.1% in March, the first back-to-back declines since April and March 2020, at the start of the coronavirus pandemic.
Economists polled by Reuters had on average expected GDP to grow by 0.1% in April from March.
GDP would have expanded by 0.1% excluding the impact of a reduction in the government’s coronavirus test-and-trace and vaccination programs, the Office for National Statistics said.
But it was the first time since January last year that all main economic sectors had shrunk.
Over the three months to April, GDP was up by 0.2%, weaker than the Reuters poll forecast of 0.4% and slowing sharply from growth of 0.8% in the three months to March.
Many firms said increases in the cost of production had affected their business, the ONS said.
Martin Beck, chief economic advisor to the EY ITEM Club, a forecasting group, said the data was a poor launchpad for the second quarter, which was at an increased risk of showing a small contraction across the three months.
Growth was likely to rebound in the third quarter so the chances of a second successive quarterly decline in GDP – the traditional definition of a technical recession – looked low.
“But the growth outlook is poor. An already serious squeeze on households’ spending power will be negatively affected by the inflationary impact of global supply chain frictions and sterling’s recent weakness,” Beck said.