Household Spending Keeping Economy Afloat

Main points

• Monthly GDP grew by 0.2 per cent in April 2023, following a decrease of 0.3 per cent in March. This monthly figure was driven by driven by an increase in services sector output which was partially offset by falls in production and construction output.
• GDP grew by 0.1 per cent in the three months to April relative to the previous three months, in line with our most recent forecast. As shown in figure 1 below, the economy has largely flatlined following the initial stages of post-pandemic recovery; today’s monthly GDP is estimated to be only 0.3 per cent above its pre-pandemic (February 2020) level. As we stress in our latest UK Economic Outlook, for UK economic performance to ‘jump-start’ into a new era of high output growth, structural change will be needed.
• Higher-frequency data suggest that continued growth in services in May be partially offset by a further decline in manufacturing activity. We forecast monthly GDP to remain flat in May relative to April.
• We forecast GDP to grow by 0.1 per cent in the second quarter of 2023, remaining broadly consistent with the longer-term trend of low economic growth in the United Kingdom.

“GDP grew by 0.2 per cent in April relative to March, driven by an increase in services sector output which was partially offset by falls in production and construction output. The largest positive contributors to GDP were growth in wholesale and retail trade, and information and communication, while the largest negative contributor was manufacturing; these contributions are consistent with the longer-term trend of household spending driving growth. With the Bank Rate set to rise further over the coming months, curbing demand, it is likely that UK growth will continue to be anaemic at best.”

 Paula Bejarano Carbo
Associate Economist, NIESR

See our previous GDP tracker to follow the analysis.

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