According to Gregory, there is still more than 60% to come, indicating that a recession is likely to occur in the second half of this year. The signs of an economic downturn are becoming evident, with a 0.6% decrease in construction output due to a 1% decline in new work. Pantheon Macroeconomics’ chief UK economist, Samuel Tombs, revealed that higher borrowing costs had impacted new housing demand, leading to the decline. The ongoing public sector strikes have also added to the burden, resulting in a 0.9% decrease in monthly output in the health sector.
KPMG UK’s chief economist, Yael Selfin, expressed concerns about significant economic challenges as the Bank of England faces difficulties in controlling inflation. Selfin noted that inflation has proven to be more persistent than originally expected, continuing to strain households’ income. Consequently, the Bank of England is likely to continue raising interest rates, which will further pressure both households and businesses as they deal with higher borrowing costs.
The services sector, on the other hand, experienced strong growth, with a 0.3% increase in April following a 0.5% growth in March. This sector was the main driver behind the overall GDP growth. In fact, monthly GDP has now surpassed pre-coronavirus levels by 0.3%. Chancellor of the Exchequer, Jeremy Hunt, proudly stated that the economy is growing, highlighting the IMF’s projections that the UK will outperform countries like Germany, France, and Italy in terms of growth from 2025 onwards.
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