The UK economic system contracted in March, persevering with the poor efficiency of the earlier month as manufacturing slowed and the dominant providers sector faltered as households braced for rising residing prices.

The commerce deficit additionally widened within the first quarter to the most important since data started in 1955 as exports fell whereas imports surged.

Gross home product declined 0.1 per cent between February and March, information printed by the Workplace for Nationwide Statistics confirmed on Thursday, beneath the no change forecast by economists polled by Reuters.

It follows stagnation within the earlier month — a downward revision from an preliminary studying of 0.1 per cent enlargement.

Emma Mogford, a fund supervisor at Premier Miton Buyers, stated: “The contraction in March is a regarding information level because it indicators the economic system had began to weaken even earlier than the price of residing disaster reached its peak.”

Over the primary quarter as an entire, the UK economic system expanded 0.8 per cent over the earlier three months, boosted by stronger development in January. Nevertheless, that was beneath analysts’ expectations of 1 per cent and down from the 1.3 per cent enhance within the earlier quarter.

James Smith, analysis director on the Decision Basis think-tank, stated “the economic system already seems to be shedding momentum as the price of residing disaster intensifies and the danger of stagflation looms”.

Inflation is ready to speed up farther from its 30-year excessive final month as vitality prices have soared following Russia’s invasion of Ukraine.

Smith warned of “clear” recession dangers as common pay packets are anticipated to fall by £1,200 this yr and urged the federal government to “present additional focused help to the low- and-middle revenue households who shall be worst affected.”

Chancellor Rishi Sunak stated: “Our restoration is being disrupted by Putin’s barbaric invasion of Ukraine and different world challenges, however we’re persevering with to assist individuals the place we will.”

On a quarterly base, which is comparable with different nations, the UK economic system has now recovered to 0.7 per cent above its pre-pandemic stage, marginally above the 0.4 per cent for the eurozone, however beneath France and the US.

Samuel Tombs, economist at consultancy Pantheon Macroeconomics, stated he anticipated GDP to contract by 0.4 per cent within the second quarter as well being spending declines and customers tighten their belts. The Financial institution of England forecasts the economic system to alternate between close to stagnation and contraction over the following two years, with output barely modified by the primary quarter of 2024.

The pound, a bellwether of the UK’s relative macroeconomic efficiency, dropped 0.5 per cent on Thursday and continues to commerce close to pandemic period lows towards the greenback.

Regardless of the weak financial outlook, markets anticipate the BoE to lift its most important rate of interest from the present 1 per cent to 2 per cent by the top of the yr.

The UK’s commerce deficit for items and providers widened to a report 5.3 per cent of nominal GDP within the first quarter, the most important on report as imports rose by 9.3 per cent, largely reflecting increased vitality costs, whereas exports fell by 4.9 per cent. The autumn in exports was broad based mostly with contractions in equipment, automobiles and fuels, in addition to monetary and enterprise providers.

Enterprise funding fell by 0.5 per cent within the first quarter and was 9.1 per cent beneath its pre-pandemic stage in addition to 8 per cent beneath the that of the primary quarter of 2016, earlier than the Brexit referendum within the UK, reflecting excessive enterprise uncertainty. Funding issues for productiveness development, which finally drives wage development and requirements of residing.

Line chart of GDP index rebased, Q4 2019=100 showing The UK economic recovery from the pandemic is on a par with the eurozone

The drop in output in March was pushed by giant contractions in retailing and wholesaling, which have been down 2.8 per cent. The persevering with scaling again of the coronavirus check and hint service and vaccination programmes have been additionally a drag on development however have been offset by rising medical doctors’ appointments.

Different providers continued to recuperate from the results of Covid-19, together with hospitality, transport, employment businesses and journey businesses. There was additionally sturdy development in IT.

However, total, exercise within the providers sector, which accounts for 80 per cent of the UK economic system, slipped 0.2 per cent on the month and was the principle contributor to March’s fall in GDP.

Manufacturing manufacturing additionally fell on the month, by 0.2 per cent, with contractions in lots of industries — together with prescribed drugs, chemical compounds and trend.

In distinction, building recorded a robust month, up 1.7 per cent, which the ONS attributed to restore work after February storms.

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