- UK economy grew by 0.2% in April
- Bars, pubs and retailers fared well
- Rates and strike action took a toll on housebuilders and medical services
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“There’s a tangled web being woven around the UK economy. On the one hand the fact that a smidgeon of growth has been eked out will be seen as good news, but that very resilience is helping keep inflation simmering too.
“The jobs market is so tight that even companies considering downsizing are loathe to let any of their staff go and that’s helping create the very wage-price spiral the Bank of England had warned against.
“People still in jobs have money to spend at pubs and in shops, and they’re still buying cars, even if their hard-earned cash isn’t paying for as many rounds or as many optional extras as it used to.
“And that squeeze on incomes is leading to strike action as struggling workers fight for a little more in their pay cheques to try and offset price hikes that, in some areas, are proving stubbornly persistent.
“Strikes are taking a toll on the economy. Just look at the impact the junior doctors four-day walkout had on medical service activity in April and comments from other businesses that the industrial action by teachers at the end of the month caused further difficulties.
“Then there’s the impact of rate hikes on mortgages, which is only beginning to feed through and is already putting housebuilders and estate agents under the cosh.
“And rates are expected to have to keep on rising - a blunt tool but it’s the one Bank of England has to work with.
“Whilst inflation rages it will keep insidiously sinking deeper into the country’s economic fabric.
“The UK finds itself in a catch-22 situation. The country needs growth to stay healthy, but for the inflation medicine to work it needs to suck the fuel from the economy. A tangled web indeed.”
