The British economy rose by 0.1 percent in the first quarter of 2023, a period that was formerly anticipated to be part of a protracted recession, but an unanticipatedly sharp 0.3 percent decline in March highlighted how flimsy its recovery still is.
Reuters polled economists, who generally predicted a quarterly increase of 0.1 percent, but they also predicted that output would remain stable in the last month of the quarter.
"The fall in March was driven by widespread decreases across the services sector," according to Darren Morgan, from the Office for National Statistics.
"Despite the launch of new number plates, car sales were low by historic standards — continuing the trend seen since the start of the pandemic - with warehousing, distribution and retail also having a poor month."
As per the ONS, widespread industrial action also had a negative impact on economic activity in the quarter.
The British economy saw a poorer recovery than any other significant advanced economy, remaining 0.5 percent smaller than it was in the fourth quarter of 2019, just before the coronavirus pandemic.
"With the key services side of the economy continuing to slow in the face of higher borrowing costs and rising prices, it still feels like we’re walking through treacle," said Tom Stevenson, personal investing director at Fidelity International.
"With inflation still in double digits, it feels depressingly like a re-run of 1970s stagflation."
Only 0.1 percent more was produced in March than in February 2020, the last full month before the pandemic.
"A weaker economy in March underscores its fragility despite a fall in wholesale energy prices, improving supply chain conditions, and consumer confidence that has also recovered from multi-year lows," KPMG economist Yael Selfin said.
"While recession is probably no longer on the cards, vulnerabilities resulting from higher borrowing costs and tighter credit are likely to dampen business and household activity this year."
The Bank of England projected on Thursday that the entire British economy will expand by 0.25 percent in 2023, which was an improvement over its earlier forecast of a 0.5 percent contraction.
(With inputs from Reuters)
