Rachel Reeves MP, Labour’s Shadow Chancellor of the Exchequer, says the federal government should draw up an emergency finances now, to assist handle the cost of living crisis.
March’s drop in GDP provides to the troubles households already face, as inflation rises quicker than wages, explains Reeves.
She urges Boris Johnson’s cupboard, who’re holding an awayday in Staffordshire as we speak, to conform to take emergency motion on the cost of living crisis, after failing to take action in the Queen’s speech.
“The Government’s Queen’s Speech this week was out of concepts and out of contact, devoid of any actual financial plan for development or to deal with the cost of living crisis.
“Anything less than coming back urgently with an Emergency Budget to help ease the pressure from the cost of living crisis is a failure by this Conservative government.”
The drop in GDP in March will add to the stress on the federal government to do extra to assist struggling households, as requires an emergency finances enhance.
Chancellor of the Exchequer, Rishi Sunak, says he is aware of these are ‘anxious times’ — however doesn’t pledge any new assist.
Responding to the GDP figures, Sunak says:
“The UK economy recovered rapidly from the worst of the pandemic and our development in the primary few months of the year was sturdy, quicker than the US, Germany and Italy, however I do know these are nonetheless anxious instances.
“Our recovery is being disrupted by Putin’s barbaric invasion of Ukraine and different world challenges however we’re persevering with to assist folks the place we will.
“Growth is the best way to help families in the longer-term so as well as easing immediate pressures on households and businesses, we are investing in capital, people and ideas to boost living standards in the future.”
But requires extra assist are rising by the day.
Last evening, the chair of John Lewis stated decisive motion was wanted now, to guard households from the cost of living crisis.
Dame Sharon White advised ITV’s Peston present:
“The time absolutely has come for action whether it’s an emergency budget or whether it’s another vehicle.”
The UK economy fared higher than most different G7 international locations in the primary quarter of this year.
But, its recovery from the pandemic crisis remains to be in the center of the pack.
The UK’s 0.8% development in January-March is forward of France (which stagnated), Germany (which grew 0.2%), Italy (the place GDP fell 0.2%) and the US (which surprisingly shrank 0.4%).
But the US, Canada and France have all outperformed the UK if you happen to examine development to pre-pandemic ranges, as this chart exhibits:
The 0.1% fall in GDP in March exhibits that the rising cost of living is ‘really beginning to bite’, says ONS director of financial statistics Darren Morgan.
Speaking on the Today programme now, Morgan explains:
We noticed retailing have a big fall and that was nicely under expectations. In explicit, we noticed far decrease ranges of spending on big-ticket, non-essential objects.
We additionally noticed a big fall in gas gross sales, with one issue folks telling us they’re starting to chop again on important and non-essential journeys as a result of of the worth they’re paying on the pumps.
Morgan provides that the UK’s motor commerce indutry is admittedly struggling in the meanwhile. New automotive registrations in March have been the weakest since 1998, partly as a result of provide chain points.
Darren Morgan, director of financial statistics on the Office for National Statistics (ONS), says:
“The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic ranges, though development in the most recent three months was the bottom for a year.
“This was driven by growth in a number of service sectors as the economy continued to recover from Covid-19 effects, including hospitality, transport, employment agencies and travel agencies. There was also strong growth in IT.”
“Our newest month-to-month estimates present GDP (gross home product) fell a bit in March, with drops in each providers and in manufacturing.
“Construction, though, saw a strong month, thanks partly to repair work after the February storms.”
Overall, the UK financial development slowed to 0.8% through the first three months of 2022, as the economy cooled.
That’s slower than the 1.3% development recorded in October-December, nevertheless it does elevate quarterly GDP above its pre-crisis ranges.
It’s additionally a bit weaker than the 1% development anticipated by economists.
That might be the perfect quarterly development we see this year, as the cost of living crisis hits the economy.
After March’s reversal, the UK economy is now simply 1.2% above its pre-coronavirus pandemic degree.
Services is now 1.5% above its pre-coronavirus degree, whereas building is 3.7% above and manufacturing remains to be 1.6% under — with factories having struggled with provide chain disruption, and shortages of uncooked supplies and elements.
The UK’s service sector shrank by 0.2% in March, and was the principle contributor to March’s 0.1% drop in GDP.
Output in consumer-facing providers fell by 1.8%, following a 0.5% development in February 2022.
Production additionally shrank by 0.2%, however building expanded by 1.7% (suggesting constructing exercise recovered after storm disruption in February).
Newsflash: The UK economy contracted in March, with GDP falling by 0.1%.
That’s barely worse than the 0% development forecast, and can gas considerations that economy is weakening.
The GDP report additionally exhibits there was no development in February.
February’s GDP has been revised right down to 0% development, down from the +0.1% first estimated.
More to comply with…
Deutsche Bank UK economist Sanjay Raja additionally predicts the UK economy flatlined in March, and will contract in the present quarter (April-June).
Here’s his take the UK GDP report (to be launched in round 10 minutes):
We anticipate Q1-2022 GDP to develop by slightly below 1% q-o-q. Much of the soar in exercise will probably have come from family consumption and personal funding (together with web acquisitions, dwelling funding, and shares).
Looking forward to Q2, we shall be watching the March GDP quantity intently, given the carry over impact into the following quarter. On this entrance, we anticipate month-to-month GDP to have flatlined, with dangers tilted to a unfavourable print. We proceed to anticipate a Q2 contraction, with the economy shrinking by 0.2% q-o-q – a name we’ve had for a while now.
For 2022, we proceed to see development printing at 3.8%, although dangers to our projection are tilted to the draw back, with recession dangers more likely to stay elevated into Q2-2022.
Good morning, and welcome to our rolling protection of business, the world economy and the monetary markets.
A brand new healthcheck on the UK as we speak will present how the economy has slowed, as the cost of living crisis hits households and threatens to tug the nation into recession.
The GDP report for the primary quarter of 2022, due at 7am, is anticipated to point out that the economy expanded by a healthy-sounding 1% in Q1, down from 1.3% in the ultimate quarter of 2021.
But most of that development got here in January, as activity picked up strongly after Omicron disruption in December.
Growth slowed to simply 0.1% in February, and a few economists concern it might have floor to a halt in March, with estimates of 0% development in March alone.
Michael Hewson of CMC Markets explains:
Index of providers is anticipated to make up most of the growth, coming in at 0.9%, nonetheless if the Bank of England is to be believed this quarter might be as good as it will get this year for the UK economy. Business funding can be anticipated to enhance to 1.9% from 1% in This fall.
On the month-to-month GDP numbers, we’ve seen a 0.8% growth in January, and a 0.1% growth in February. March might nicely see a contraction, though estimates are for stagnation at 0%, which remains to be more likely to drag the quarterly quantity down.
Also arising as we speak
European markets are set to fall round 1%, wiping out Wednesday’s rally, as fears over inflation and rising rates of interest preserve hitting shares.
Wall Street had one other turbulent session yesterday, ending decrease, with expertise shares persevering with to slip.
Higher than anticipated US inflation dampened hopes that the US Federal Reserve might obtain a ‘soft landing’ as it raises rates of interest, with CPI solely dipping to eight.3% in April.
Hebe Chen of IG explains:
Inflation in the United States rose at a slower rate in April, however impatient merchants weren’t pleased with the tempo.
The US CPI print that got here out final evening was nonetheless stronger than the forecast of 8.3% vs 8/2% (y/y), suggesting the worth stress will persist at larger ranges for longer even when it’s already peaked.
That selloff has seen Apple lose its title as the world’s most useful company to vitality large Saudi Aramco, which has been boosted by larger oil costs.
On the company entrance, BT, Rolls-Royce, Balfour Beatty and SuperDry are reporting outcomes.
- 7am BST: UK GDP and commerce experiences for Q1 2022, and March
- 9am BST: IEA month-to-month oil market report
- 9.30am BST: ONS’s newest financial exercise survey
- 1.30pm BST: US PPI survey of producer worth inflation
- 1.30pm BST: US weekly jobless claims report