UK economy stalls in April as wet weather holds back retail spending

LONDON - Britain’s economic recovery ground to a halt in the run-up to the general election, a setback for Prime Minister Rishi Sunak, who has campaigned on evidence that the economy is turning the corner.

Gross domestic product was flat in April compared with the previous month, a slowdown from 0.4 per cent growth in March, the Office for National Statistics (ONS) said on June 12. Economists had expected a 0.1 per cent drop in output.

After tipping into a mild recession last year, Britain is struggling to deliver economic growth this year after the highest interest rates in 16 years and a cost-of-living crunch weighed down on the finances of both businesses and consumers.

Wet weather contributed to slower retail sales, while manufacturing and construction also fell more sharply than expected. Services turned in 0.2 per cent growth in the month, which was stronger than the expectation for a small drop.

The ONS said that output in consumer-facing services slipped by 0.7 per cent in April with wet weather hitting the retail sector. Rainfall was 155 per cent of the long-term average in April, according to the Met Office.

The Bank of England (BOE) hopes that slower demand will rein in inflation, allowing it to reduce borrowing costs later this year. But investors are betting any move won’t come until August at the earliest.

Mr Sunak has hoped a “feel-good factor” from rising wages and lower inflation will help him close a 20-point deficit in his poll readings against the Labour opposition.

The most recent data undercut the claims that Conservative ministers have made about the buoyancy of the economy, which relied on first-quarter growth figures showing Britain matching the fastest expansion in the Group of Seven nations.

The opening sentences of the Conservative manifesto released on June 11 boasted that “growth has returned” following last year’s slump.

But the outlook for the rest of the year is bleaker. Private economists are anticipating a meagre 0.6 per cent expansion for the whole of 2024, up from just 0.1 per cent last year, but well below the trend levels the UK enjoyed in previous decades.

Mr Sunak has warned voters that it will take time to feel the benefits of an improving economy and lower inflation. Many households are still being squeezed, with wages in real terms having only recovered to levels seen in 2008.

It was the final official growth numbers before the election, except a second estimate of first quarter GDP due later this month.

Britain’s unemployment rate ticked up unexpectedly in the three months through April to 4.4 per cent, the most in 2½ years. New job vacancies declined, but wage growth held firm well above the level the BOE says is compatible with its 2 per cent inflation target. BLOOMBERG