Prices are rising at their fastest pace in 30 years, driven by rising fuel, food and energy costs – and the worst is yet to come, the Bank of England has warned
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The UK economy grew 0.8% between January and March, compared with growth of 1.3% in the previous three months, the Office for National Statistics said today.
In the first three months of the year, the economy grew 0.8% as the hospitality and travel industries recovered from coronavirus pandemic restrictions.
The Bank of England has warned the UK is facing a “sharp economic slowdown” this year as it hiked interest rates again last week.
Prices are rising at their highest rate in 30 years, driven by rising fuel, food and energy costs.
It has forecast that inflation — the rate at which prices are rising — could hit more than 10% by the end of the year.
According to the ONS, a 15.1% fall in car and motorcycle repairs was the main reason behind the decline in the UK services sector in March.
But it said the construction industry had had a strong month as repairs needed to be made to homes and buildings following storms in the UK in February.
Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said: “The UK economy has grown for a fourth straight quarter and is now well above pre-pandemic levels, despite growth over the past three months being the lowest since a year.
“This was due to growth in a number of service sectors as the economy continued to recover from the impact of Covid-19, including hospitality, transport, employment services and travel agencies. There was also strong growth in IT.”
He added: “Our latest monthly estimates show that GDP (gross domestic product) fell slightly in March, with declines in both services and manufacturing.
“However, construction had a strong month, thanks in part to repair work following the February storms.”
Hinesh Patel, portfolio manager at Quilter Investors, said: “UK GDP came in weaker than expected for Q1 and March as the economic toll of inflation begins to take hold.
“January was the only positive month of the quarter as the Russia-Ukraine conflict caused supply chain issues across all industrial sectors and weighed on economic growth.
“In the end, it will only get worse for consumers. Energy bills are expected to rise again later this year as the price cap is reassessed, while inflation is proving more stubborn than expected.
“The Bank of England has an almost impossible task to pull the economy out of this quagmire. They are currently in an aggressive rate hike mode, but this cannot remain so for long as the economic problems are already starting to play out.”
Chancellor of the Exchequer Rishi Sunak insisted there was support for households.
“The UK economy has recovered quickly from the worst of the pandemic and our growth has been strong for the first few months of the year, faster than the US, Germany and Italy, but I know these are still anxious times.
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“Our recovery is being disrupted by Putin’s barbaric invasion of Ukraine and other global challenges, but we continue to help people where we can.
“Growth is the best way to help families in the longer term, so we invest not only in the immediate pressures on households and businesses, but also in capital, people and ideas to improve living standards in the future.”
Rachel Reeves MP, Labor Shadow Chancellor, said: “Today’s GDP figures will add to family concerns as prices soar and wage packages collapse.
“The Chancellor’s ignoring of serious warnings undermines any claim that he could not have done more to shield the UK economy from rising inflation.
“The Queen’s speech this week was unimaginative and out of touch, with no real economic plan for growth or to deal with the cost of living crisis.
“Anything other than urgently coming back with an emergency budget to ease the pressure from the cost-of-living crisis is a failure by this Conservative government.”
Around 1.5 million British households will struggle to pay food and energy bills, a leading think tank warned yesterday.
Soaring inflation, exacerbated by the war in Ukraine, will leave many families with food and energy bills that exceed their disposable income, the National Institute for Economic and Social Research (Niesr) said.
Niesr said Chancellor Rishi Sunak should increase Universal Credit payments by £25 a week and give the UK’s 11.3 million low-income households a one-time cash payout of £250.
But the PM said while more support could come later in the year, the government could not “fully shield people from the rising cost of living”.
“We will continue to use all our ingenuity and compassion for as long as it takes,” he added in a message to MPs.
“The Chancellor and I will say more about this in the next few days.”
Households are currently facing soaring energy bills, inflation is expected to reach 10% and social benefits and wages cannot keep up with rising prices.
Charities, activists and opposition politicians have criticized the lack of short-term measures to support people who are dealing with the rising costs on a daily basis.
Union leader Sir Keir Starmer called the response to the cost-of-living demands “pathetic” and accused the government of being “incompetent”.
He told Mr Johnson: “This government’s failure to let the economy grow over a decade, combined with its indolence in the face of spiraling bills, means we are looking down the barrel of something we haven’t seen in decades, one stagflation crisis. “
Torsten Bell, chief executive of the think tank Resolution Foundation, said ministers had “not announced anything that will make a significant difference” to boost economic growth.
https://www.mirror.co.uk/money/uk-economy-shrank-march-households-26942146 The UK economy shrank in March as households were rocked by rising food and living costs