Retail drives modest growth in UK economy

Retailers helped Britain's economy inch higher in April, despite contractions in manufacturing and construction, according to data published today (14) that are pointing to slow growth rather than recession.

Britain's economy grew by 0.2 per cent month-on-month in April, the Office for National Statistics said, highlighting retail and film industries among largest contributors. Today's data chimed with business surveys that point to weak activity - but no recession which had been widely predicted only a few months ago.

Over the three months to April, Britain's economy expanded just 0.1 per cent - a "low growth trajectory" according to the British Chambers of Commerce.

"Looking ahead, we continue to expect GDP in Q2 as a whole to be unchanged from Q1," said Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics. "Public sector strikes have continued to rumble on, and the lost working day for the King's coronation probably inflicted a 0.2 percentage point blow to GDP in May," Tombs added.

In response to today's figures, finance minister Jeremy Hunt said the government would stick to its plan to halve inflation this year.

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, fears that “a Herculean effort” will still be needed to avoid a recession.

“Today’s GDP growth of 0.2 per cent proves that the UK economy opened the latest quarter more strongly than the previous quarter, boosting the possibility that economic activity will be resilient enough to help the UK sidestep a recession. However, it is far too soon to call the ‘all clear’, particularly with the Bank of England poised to remain on its rate-hiking mission to suppress inflation that remains too high for comfort.

“Following March’s dip in economic activity fueled by industrial action, April saw fewer days lost to strikes and was accompanied by the retail sector springing back to action. Manufacturing and industrial production remain resilient after a solid first quarter, supported by a positive trend in vehicle production, gas output and mining activity.

“While the UK economy is proving rather more resilient than its Euro Area counterpart, there remain grounds for continued caution. Consumer spending continues to be smothered by relentless inflation and households are under growing pressure from rising mortgage rates. Given these ongoing squeezes, a Herculean effort will still be required to avoid a recession," Batstone-Carr said," The Guardian quoted Batstone-Carr as saying.