UK reports back-to-back declines in GDP, first time since start of pandemic

Official numbers released on June 13 showed that Britain's Gross Domestic Product (GDP) unexpectedly dropped in April, raising fears of a dramatic slowdown just three days before the Bank of England reveals the amount of its latest interest rate response to the spike in inflation. The economy shrank by 0.3 percent in April after falling by 0.1 percent in March, the first back-to-back declines since the coronavirus pandemic began in April and March 2020.

Rishi Sunak, Britain's finance minister, said the country was not alone in feeling the effects of rising prices and the aftermath from Russia's invasion of Ukraine. "Countries around the world are seeing slowing growth, and the UK is not immune from these challenges," Sunak said in a statement.

Sunak announced further household assistance in May. Later in 2022, he is likely to accomplish more.Last week, the Organisation for Economic Cooperation and Development predicted that Britain's GDP will grow at zero percent in 2023, the poorest prediction of any Group of 20 (G20) country for the next year, with the exception of sanctions-hit Russia.

The Confederation of British Industry issued a warning on June 13 about stagnation and the possibility of a recession. Despite the slowdown, the Bank of England is set to hike interest rates again on June 16, for the sixth time since December.

Inflation is expected to exceed 10% in the fourth quarter, five times the government's target. The majority of investors and analysts anticipate another quarter-point rate hike this week, bringing the bank rate to 1.25 percent, its highest level since 2009.

Because of rising energy prices, Britain imported 9.8 billion pounds of fuel commodities in April alone, the largest since records began in 1997 and accounting for over a fifth of all goods imports.

According to economists, Monday's GDP report had some hopeful news, including a 2.6 percent gain in consumer-facing services such as hairdressers and the grooming business. The retail industry expanded by 1.4 percent as well.

However, the increase in domestic electricity tariffs in April, as well as an increase in worker taxes, are anticipated to put downward pressure on living standards and the broader economy.

Separate trade data from the ONS revealed the impact of sanctions on Russia, with exports to the country falling to their lowest monthly value since January 1999 and imports falling to their lowest level since March 2004.