Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The UK economy declined by 1.5% in the three months to March (when the country was in lockdown) from the previous quarter, according to the Office for National Statistics. This is not as bad as the 1.7% drop forecast by City economists.
More encouragingly, the economy grew by 2.1% in March, the most since August, as schools reopened across England and Wales. However, GDP remained 5.9% below its pre-pandemic peak in February 2020, and 1.1% below the initial recovery peak last October.
The service sector grew by 1.9% in March, as retail sales continued to strengthen, even before non-essential shops reopened in April. The production sector, which includes utilities, mining and manufacturing expanded by 1.8%, with manufacturing output rising for a second month, by 2.1%.
Construction was even stronger with 5.8% growth, boosted by work undertaken by businesses to make their premises Covid-19 secure.
Alpesh Paleja, lead economist at the business group CBI, said:
While latest data confirms the economy was hit once again by a renewed lockdown at the turn of the year, the fall in activity was much smaller compared with spring 2020. Households and businesses have clearly adapted better to working and living under Covid restrictions, despite the brutal cost of doing so.
A range of indicators, including CBI business surveys, point to a rebound in activity heading into summer – with the economy opening up and pent-up demand waiting to be unleashed. But this is a recovery that will be felt more by some. Undoubtedly, hardest-hit sectors and households have a longer road ahead.
Stocks sold off around the world yesterday, haunted by fears that central banks will have to abandon their zero-interest rate strategies in the face of mounting inflation.
Recent rises in commodity prices have stoked inflation fears, compounded by yesterday’s Chinese factory gate prices for March which rose 6.8% – a rise of over 7% since the end of last year, and the highest level since November 2017.
In the UK, the FTSE 100 had its biggest one-day fall since February, closing down 175.69 points at 6947.99 – a drop of 2.47%. It was a similar story on Wall Street, where the Dow Jones also recorded its biggest loss since late February, falling 473.66 points, or 1.36%, to 34,269.16.
The declines continued overnight in Asia, where Japan’s Nikkei fell 1.6% and the Australian market was down 0.7%, while Hong Kong’s Hang Seng edged up 0.15%. European markets are on course for a choppy open.
- 7.45am BST: France Inflation final for April (forecast: 1.3%)
- 9am BST: IEA Oil report
- 10am BST: Eurozone industrial production for March (forecast: 0.7% month on month)
- 10am BST: Bank of England governor Andrew Bailey speech
- 1.30pm BST: US Inflation for April (forecast: 3.6%, previous: 2.6%)
- 2pm BST: UK NIESR Monthly GDP for April