In April, the UK economy experienced zero growth, as per recent official statistics that have been highlighted by critics of the government as proof that the Conservatives’ acclaimed strategy is ineffective.
According to the Office for National Statistics (ONS), there was no growth in April, contrasting with the 0.4% increase noted in March.
Anticipated by a Reuters news agency survey of economists, the stagnant 0% performance was foreshadowed by earlier indications that damp weather negatively impacted retail sales and construction output significantly.
The ONS’s report on the Gross Domestic Product (GDP) – the final report preceding the election – illustrated that the UK experienced 155% of the long-term average rainfall in April.
Resulting from this, construction output decreased by 1.4%, primarily due to weak demand for construction goods in the manufacturing industry. Production declined by 0.9%, while the services sector, contributing to nearly 80% of the UK’s total output, only grew by 0.2%.
Despite attributing the slowdown to rain, these figures present a setback to Prime Minister Rishi Sunak’s primary electoral assertion that the economy is recovering following successive blows from the COVID pandemic and the ongoing cost of living crisis.
Exiting a brief recession at the end of 2023 with a recorded 0.6% growth in the current year’s first quarter, economists foresee continued growth in the three months leading up to June, but at a slower pace of around 0.3% – half of the rate achieved between January and March.
Prior to the election day on 4th July, the final set of inflation figures will be released, followed by a Bank of England interest rate decision the next day.
With little chance of a rate cut on 20th June, financial markets and economists are cautious, especially considering the rising wages that could escalate price growth further despite substantial progress in combating inflation. The current consumer prices index stands at 2.3% and is projected to decrease further with the May data release.
Chancellor Jeremy Hunt stated, “There is progress, but additional efforts are required to ensure sustained economic growth and normalize inflation.” He reiterated the Conservative Party’s commitment to fostering economic growth through tax reductions on employment, real estate, and retirement savings.
In response to the ONS figures, Shadow Chancellor Rachel Reeves remarked, “Rishi Sunak claims to have turned a corner, yet the economy has stalled, showing no signs of growth.”
In the ongoing general election campaign, the Labour Party has outlined its strategy to revitalize the economy by reinstating stability, encouraging private sector investments, and reforming the planning system, while criticizing the Conservative Party for offering unaffordable pledges that could burden individuals with increased mortgage costs.
Liberal Democrat Treasury spokeswoman Sarah Olney noted the lack of growth in April as evidence of the Tories’ failure to fulfill their promises and deliver sustainable economic progress.
As Yael Selfin, KPMG UK’s chief economist, analyzed the future outlook, highlighting that forthcoming economic indicators suggest a revival in activity in the upcoming months, supported by improved consumer confidence and robust wage growth.
Nevertheless, regardless of the election outcome, the winning party will confront several challenges that could impede the UK’s long-term growth. Hence, a modest growth rate of 0.5% is anticipated for this year, reflecting continued sluggish economic activity.
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