Economy returns to growth in April

Monthly GDP grew by 0.2% in the month – following a fall of 0.3% in March, with monthly GDP now estimated to be 0.3% above its pre-Covid levels. More broadly, GDP grew by 0.1% in the three months to April when compared to the three months January.  

This was primarily driven by boosts for the production and construction sectors, which grew by 0.2% and 1.6% respectively – but offset by a 0.1% drop for the services sector. In April, output in the services sector grew by 0.3% while production and construction output decreased by 0.3% and 0.6% respectively.  

Reflecting on this, Hargreaves Lansdown’s head of money and markets Susannah Streeter said: “With consumer spending holding up, particularly in hospitality, and the impact of strikes more minimal, the UK economy has eked out growth in April, but stubborn inflation is still casting a shadow over the slightly sunnier outlook. 

“Although the UK continues to swerve a technical recession and buck earlier forecasts, the situation is fragile, with growth of just 0.1% over the three months to April. The construction sector had seen an uptick in activity in March but contracted by 0.6% in April, with customers putting off repair and renovation projects amid uncertainty over the direction of interest rates. 

“With recent data showing prices and wages are still rising sharply, further rate hikes could act like a vice-grip on spending power going forward. Fresh strikes have also been called, which are set to continue to act as a drag on growth. 

“However, the path of rates ahead, and the economy, is still clouded in uncertainty.  This is partly because the current reaction on markets could be doing the Bank of England’s job for it. The expectation that rates could head to 5.5% has seen the better mortgage deals whipped away, which will dent the finances of 1.6 million households having to re-mortgage this year and is already set to reduce demand for goods and services.”