Drop in monthly GDP in March

Coming off the back of it showing no growth in February, GDP is now estimated to be just 0.1% above its pre-Covid levels from February 2020 and 0.5% smaller than in the fourth quarter of 2019.  

The services sector was the main contributing factor to the overall fall, decreasing by 0.5% in March – with falls for nine of the 14 sub-sectors in this field. However, both production and construction output saw some growth – going up by 0.7% and 0.2% respectively 

Additionally quarterly GDP is estimated to have grown in the first three months of 2023, going up by 0.1%. Responding to this, Hargreaves Lansdown lead equity analyst Sophie Lund-Yates said: “UK GDP edged forward 0.1% in the first three months of the year, with growth eked out despite strike activity which derailed some momentum.  

“The data comes hot on the heels of changed forecasts from the Bank of England. Lower energy prices are expected to stop the UK economy from contracting compared to previous expectations.  

“The economy is also being boosted by higher household spending, thanks to government measures earlier in the year. While the surprise change in the UK’s economic growth is certainly welcome, there are still real hurdles to overcome.  

“There’s no sugar coating the fact that growth remains very sluggish – the UK is hardly on course to shoot the lights out this year. The main issue is that inflation is set to fall more slowly than expected, partly because of the unprecedented rise in supermarket prices.  

“It’s now thought that inflation will stay above its two percent target until 2025, a full nine months longer than initially forecast. The labour market also remains very tight, and high levels of job security makes for more money pumping around the system.  

“This all leads back to the fact interest rates will have to rise again to bring inflation in line. As things stand, the average household may have to pay £200 extra a month on mortgages, and that could have real implications for the housing market, and by proxy, banks and housebuilders, in the not-too-distant future.”