The UK economy unexpectedly contracted for two months in a row, according to new official figures, while business leaders warn that we could be heading for a recession this year and into the next.
Gross domestic product in April fell 0.3% on the previous month, the Office for National Statistics estimated, when growth of 0.1% had been forecast, following zero GDP growth in February and a 0.1% decline in March.
Industrial production fell 0.6% in the month of April, following on from a 0.2% decline in March, and far undershooting the forecast 0.3% rebound.
Manufacturing companies reported being affected by rising fuel and energy prices, said ONS director of economic statistics Darren Morgan., with the ending of free Covid testing in March weighing on growth.
“A big drop in the health sector due to the winding down of the test and trace scheme pushed the UK economy into negative territory in April,” he said.
These factors were partially offset by growth in car sales, which recovered from a significantly weaker than usual March.
Economist Martin Beck at the EY ITEM Club said: “Combining April's contraction with a poor launchpad for growth in Q2 and June's extra bank holiday, the risk is increasing that the current quarter will see a fall in GDP.
“Output should rebound in Q3 with its full quota of working days. But the effect of continued global supply chain frictions and the weaker pound in keeping inflation higher for longer, alongside further interest rate rises, will exacerbate cost of living pressures and hold back activity.”
Earlier, the Confederation of British Industry joined the chorus of organisations warning of the looming potential for a UK recession.
The CBI downgraded its economic growth outlook for the full year to 3.7% from 5.1%, and for 2023 to 1% from 3%.
Last week the OECD said Britain had the weakest outlook of any major economy outside Russia, with growth of 3.6% in 2022 and zero growth in 2023, down from 4.7% and 2.1% estimates earlier this year. It expects consumer price inflation will average 8.8% this year and 7.4% in 2023.
With the CBI also seeing inflation continuing to apply a “historic squeeze” on household budgets, director-general Tony Danker said: "Let me be clear - we're expecting the economy to be pretty much stagnant.
“It won't take much to tip us into a recession, and even if we don't, it will feel like one for too many people.
"Times are tough for businesses dealing with rising costs and for people on lower incomes concerned about paying bills and putting food on the table.”