British economy contracted in March amid recession risks

Trafalgar Square, London

By David Milliken and William Schomberg

LONDON (Reuters) – The United Kingdom’s economy unexpectedly shrank 0.1% in March as car sales slowed due to supply chain problems, ending the first quarter weakly with the risk of recession.

The National Bureau of Statistics said gross domestic product rose 0.8 percent in the first three months of 2022, below the central bank’s forecast of 0.9 percent and a Reuters poll of 1.0 percent.

Although expectations were not met, expansion between January and March is expected to mark a high point for this year, with consumer spending seeing the biggest pressure in decades.

Last week, the Bank of England forecast inflation would rise above 10% in the final quarter of the year, from 7% in March against a 2% target.

“Our recovery is affected by the barbaric invasion of Ukraine (by Russian President Vladimir) Putin and other global challenges, but we continue to help people when we can,” Finance Minister Rishi Sunak said after the data was released on Thursday.

The United Kingdom, unlike its European neighbors, has limited direct economic relations with Russia, but is strongly affected by rising energy prices in Europe.

On a monthly basis, GDP is now 1.2% higher than its pre-Covid level in February 2020. However, much of the recovery reflects higher healthcare spending – up 11% since the pandemic began – while consumer services are still 7% lower. . pre-covid level.

In the month of March alone, auto and motor vehicle sales fell 15.1%, resulting in a 0.2% decline in total service production.