UK Q1 GDP grew 0.8%, contracted in March

Tom Brown

12-May-2022

LONDON (ICIS)–UK GDP grew 0.8% quarter on quarter in the first three months of 2022, but the economy contracted in March, the Office for National Statistics (ONS) said on Thursday, after consumer spending slowed due to a surge in the cost of living and general economic unease.

Production fell 0.2% in March, which followed a 0.3% decline in February.

The chemicals sector was a substantial driver of the fall in manufacturing output during the month, declining 3.5%, with textile and basic pharmaceutical production falling 4.1% and 5.4% respectively.

A rebound in component stocks saw transport sector manufacturing output grow 3.5% after two months of contraction.

The service sector saw a more muted decline, contracting 0.2% after recording zero growth in February, the ONS added.

The bulk of the quarterly growth seen in the first three months of the year was recorded in January, but slowing output in the ensuing months and the impact of Russia’s invasion of Ukraine pushed GDP growth down to 0.1% in February.

Current momentum points to a further contraction in the second quarter, according to analysts at Belgian banking group ING.

“We should expect a second consecutive decline in April, which will coincide with the ending of free COVID-19 testing. Surprisingly, health output actually increased in March despite the ongoing wind-down of Covid-related activities, but clearly, that’s unlikely to last,” said ING analyst James Smith.

“Throw in the distortion of the extra bank holiday scheduled for June, as well as the ongoing impact of the consumer spending squeeze, and we’re likely to see a modestly negative GDP figure for the second quarter as a whole,” he added.

Front page picture: Chemical production facilities in Wilton, in north England’s Teesside region
Source: Chemical Parks in Europe

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