NIESR said the negative growth of -0.3% mom in UK GDP in April “increases the chances of a recession. The impact of rising energy prices is likely to “impede recovery in the coming months. It now forecasts month-on-month GDP growth to “stagnate in May and June, leading to a decline of -0.4% in Q2 overall.

“April’s headline 0.3 per cent fall in GDP hid some strength in private services sectors: strong growth in retail, hospitality and other services suggests that some households may have been able to smooth their consumption in the face of the inflation shock. Manufacturing appears to be suffering as a result of the impact of high petrol and energy, with declines in 8 out of 13 sub-sectors, but April’s overall decline was principally driven by the winding-down of the Test and Trace programme, which had made significant positive contributions to GDP over most of the Covid-19 period”. Rory Macqueen, Principal Economist, NIESR.

Full release here.

UK GDP contracted -0.3% mom in April, worse than expectation of 0.2% mom growth. Services fell -0.3% mom. Production fell -0.6% mom. Construction also fell by -0.4% mom. This is the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021.

Also released, manufacturing production came in at -1.0% mom, 0.5% yoy, versus expectation of 0.2% mom, 1.8% yoy. Industrial production was at -0.6% mom, 0.7% yoy, versus expectation of 0.2% mom, 0.5% yoy. Goods trade deficit widened to GBP -20.9B.

Full GDP release here.

In the new economic forecasts, British Chambers of Commerce projected that UK inflation rate will reach 10% in Q4 this year, “comfortably outpacing average earnings growth”. That would be the highest since CPI records began in 1989. CPI is only expected to finally fall back to BoE’s target of 2% by the end of 2024. BoE interest rate is expected to rise to 2% in 2022, and 3% in 2023.

GDP growth in 2022 was downgraded slightly from 3.6% to 3.5%. Quarter on quarter GDP growth is expected to ” flatline with no growth expected in Q2 and Q3 before contracting by 0.2% in Q4″. Growth is expected to slow sharply to just 0.6% for 2023, before recovering slightly to 1.2% in 2024.

Alex Veitch, Director of Policy at the British Chambers of Commerce, said: “Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing with continued inflationary pressures and sluggish growth. The war in Ukraine came just as the UK was beginning a Covid recovery; placing a further squeeze on business profitability.”

Full release here.

UK PMI Construction dropped from 58.2 to 56.4 in May, below expectation of 56.9. S&P Global said total activity expanded at the slowest pace since January. Housing remained worst-performing category. Optimism was lowest since August 2020.

Tim Moore, Economics Director at S&P Global Market Intelligence: “May data signalled a solid overall rise in UK construction output as resilience across the commercial and civil engineering segments helped to offset weakness in house building. Residential construction activity was close to stagnation… New order volumes expanded at the slowest pace since the end of 2021…

“Concerns about the business outlook were signalled by a fall in construction sector growth projections to the lowest for more than one-and-a-half years in May. Around 19% of construction firms predict an outright decline in business activity during the year ahead, up from just 5% at the start of 2022.”

Full release here.