"All of this should do little to impact the Bank of England’s current thinking about policy, with a cut in June very unlikely, but a move in August still on the cards so long as inflation data behave."
- Luke Bartholomew, deputy chief economist at abrdn
Monthly GDP flatlined in April, following growth of 0.4% in March, as wet weather impacted spending, according to the latest ONS statistics.
Services output grew by 0.2% in April 2024, its fourth consecutive monthly growth, but production output fell by 0.9% and construction output fell by 1.4%, its third monthly consecutive fall.
Although monthly GDP showed no growth in April, real GDP is estimated to have grown by 0.7% in the three months to April compared with the previous quarter.
Last month's figures show that GDP grew by 0.6% in Q1, following falls in the previous two quarters, meaning the UK economy has exited its technical recession following two consecutive quarters of negative growth in Q3 and Q4 2023.
Nicholas Hyett, investment manager at Wealth Club, commented: “The market had low expectations for the UK economy in April, and it duly delivered.
"Economic growth was flat, held back by a third month in a row of contraction in the construction industry and weakness in the manufacturing sector. Admittedly the numbers aren't helped by rain that was 155% of the long term average. That will be no surprise to anyone who's lived through the wet and gloomy start to 2024, but has nonetheless severely dented output in house building and associated industries. After strong growth in March it's a return to a less than compelling trend.
"In an election month, where every data release will be being watched closely, there's little here to change the narrative."
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, said: “Following a strong start to the year, the UK’s pace of growth stalled at the start of 2024’s second quarter.
“Flatlining economic activity in April can be partially attributed to an early Easter and its associated economic boost in March, as well as slow service sector output in part due to industrial action by rail workers. The automotive sector also experienced reduced activity, which was paired with adverse weather impacting the construction industry.
“On a more encouraging note, April’s slow figures are likely to be a blip rather than a prevailing trend. Inflationary pressures on UK households continue to ease, and the incremental impact of the April 1st increase to the minimum wage will also begin to appear in economic indicators in the months to come.
“Today’s subdued data is unlikely to change the minds of the Bank of England’s rate-setters, as the Monetary Policy Committee (MPC) has made clear that lower interest rates will be contingent on inflation’s continued decrease and developments in the labour market."
Luke Bartholomew, deputy chief economist at abrdn, added: “UK monthly GDP growth took a little breather in April after a strong month of expansion in March. The series is notoriously volatile month to month and often swung around by non-fundamental factors like the weather. So it is important not to put too much stead in just one month of data and look at the broader trend across several months. And on that measure, a picture of solid recovery from last year’s recession emerges. This should continue as the year progresses as households benefit from strong real income growth amid falling inflation. All of this should do little to impact the Bank of England’s current thinking about policy, with a cut in June very unlikely, but a move in August still on the cards so long as inflation data behave.”
