UK Economy Flatlines As Election Looms

(RTTNews) - The UK economy stagnated in April as services growth was offset by falls in production and construction output, which was largely caused by an unusually wet weather, and dealt a setback to Prime Minister Rishi Sunak ahead of the July 4 general election.

Gross domestic product remained flat on month, as expected, after expanding 0.4 percent in March, the Office for National Statistics said Wednesday.

On the production-side, services output grew 0.2 percent, marking the fourth consecutive expansion.

On the other hand, industrial output fell by more-than-expected 0.9 percent on month, following a growth of 0.2 percent in March. Output was forecast to fall marginally by 0.1 percent.

The fall was driven by the 1.4 percent decrease in manufacturing output.

At the same time, construction output dropped 1.4 percent, confounding expectations of 0.1 percent rise. This was the third consecutive monthly fall.

Monthly GDP data is a blow to Sunak ahead of the general election next month. Earlier, Sunak said that the economy was bouncing back from the downturn seen last year.

However, today's data showed that in the three months to April, real GDP advanced 0.7 percent from the preceding three months.

Although the recovery stalled in April, the dual drags on economic growth from higher interest rates and higher inflation will fade throughout the year, Capital Economics economist Paul Dales said.

"That will generate a bit of an economic tailwind for the next government," the economist added.

ING economist James Smith said UK growth is improving. The second quarter as a whole should see 0.4 percent or 0.5 percent growth after 0.6 percent growth posted in the first quarter.

The Bank of England is widely expected to hold its benchmark rate at 5.25 percent on June 20. The bank has left its rate unchanged over the last six consecutive meetings.

At 5.25 percent, the current bank rate is the highest since early 2008.

Another data from the ONS showed that the visible trade gap widened to GBP 19.6 billion in April from GBP 13.9 billion a month ago. The expected shortfall was -GBP 14.2 billion.

The surplus on trade in services was almost unchanged at GBP 12.86 billion. Consequently, the total trade gap increased to GBP 6.75 billion from GBP 1.1 billion in March.