Samuel Tombs of Pantheon Macroeconomics said he expects real household spending to “crop” in the second quarter under the weight of “the huge jump in energy prices and rising health insurance contributions.” ’employees’ national insurance’, leading to a drop in GDP.
Barret Kupelian, an economist at PwC, said the NI hike and the freezing of tax thresholds “amplified” the pressure on households, while Kitty Ussher of the Institute of Directors said the bills added ” to the huge shock to economic confidence resulting from Russia’s invasion of Russia”. Ukraine”.
The March drop leaves the economy 1.2% above its pre-Covid level of February 2020, according to the ONS.
Retail and wholesale activity fell 2.3% as vehicle sales and servicing fell more than 15% amid global supply chain chaos.
Information and communication services also fell in March, with finance and insurance activities also being somewhat less important in the month than they were in February.
However, personal services recovered while healthcare rose 2.1% on the month, with the return of more GP appointments and A&E care boosting output.
In-person appointments add more to the economy than the phone consultations that have become the mainstay of practices during the pandemic, boosting GDP as services return to something more normal.
But the surge in additional healthcare spending in the pandemic is fading, said James Smith, an economist at ING.
He said: “Healthcare spending has been a key driver of GDP during the pandemic, and in fact the overall size of the economy would be around 1% smaller if output in this sector had remained flat since the pandemic. beginning of 2020.
“Add in the distortion of the additional bank holiday scheduled for June, along with the continued impact of the consumer spending squeeze, and we’re likely to see a slightly negative GDP number for the whole of the second quarter.”
Manufacturing production fell by 0.2 pc in March, with a fall of more than 5 pc in pharmaceutical products, 4.1 pc in textiles and 3.5 pc in chemicals.
The construction industry managed to grow by 1.7pc over the month, with strong demand for home maintenance work, as well as new commercial properties.
In the first quarter of the year as a whole, GDP rose 0.8% as the economy recovered from the winter omicron surge, before the war in Ukraine propelled already high inflation into a new spiral, largely thanks to an increase in the costs of goods such as gasoline.
This spike in oil and fuel prices helped push the trade deficit to a record high of £25.2bn in the first quarter.
Business investment fell 0.5% in the quarter, which bodes ill for future growth.
Mr Sunak said: “Our recovery is 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 over the long term. In addition to easing immediate pressures on households and businesses, we are investing in capital, people and ideas to improve living standards across the country. ‘coming.”
How Britain’s ‘Roaring Twenties’ dream turned into an inflation nightmare
Brief hopes of a rebound from the ‘Roaring Twenties’ of Covid have crumbled, leaving the UK on the brink of recession.
Britain’s current GDP is barely above its pre-coronavirus level and the economy is already contracting.
While March’s 0.1pc dip in GDP is far from the only swing on the road to recovery – in December, for example, the economy shrank by 0.2pc – it is seen as the harbinger of a new slowdown.