Mon May 16th, 2022 at 11:31:21 AM EST
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UK Heading Towards A Recession
UK economic growth slows, raising recession concerns
The figures "suggest the economy had less momentum than we thought even before the full hit from the cost of living crisis has been felt," said Paul Dales, chief U.K. economist at Capital Economics. "The risk of recession has just risen."
Growth is slowing as manufacturers and retailers struggle to overcome supply bottlenecks following the COVID-19 pandemic and the war in Ukraine fuels rising food and energy prices. Retail sales figures show British consumers are already reducing spending as economists forecast the U.K. will see the biggest drop in living standards in more than six decades this year.
Thursday's figures underscore how the U.K.'s recovery from the pandemic has slowed over the past year.
UK economy 'only going to get worse' as growth slowdown begins | CNBC |
Sterling hit a two-year low versus the U.S. dollar following the data as traders digested growing uncertainty about the U.K.'s economic outlook.
The surprise monthly contraction in March -- economists had expected the figure to come in flat -- presents a worry for Prime Minister Boris Johnson's government as the country's cost-of-living crisis is yet to reach its peak.
"Ultimately, things are only going to get worse for consumers. Energy bills are expected to soar again later this year when the price cap is reassessed, while inflation is proving stickier than expected," said Hinesh Patel, portfolio manager at Quilter Investors.
U.K inflation hit a 30-year high of 7% in March and in April, the country's energy regulator increased its price cap by 54% [modest increase compared to other nations with no price cap and energy cost more than doubled] to accommodate soaring prices. In the Queen's Speech to mark the state opening of parliament on Wednesday, the government promised to focus on economic growth in order to address the spiraling cost of living..
National policies to shield consumers from rising energy prices | Brueghel |
The Dutch abide by the free-market concept set as policy by the EU in Brussels.
'Cost-of-living' crisis hits consumers as UK economy struggles with inflation | DW News |