The UK economy grew by 0.8 percent between January and March, down from growth of 1.3 percent in the previous three months, the Office for National Statistics has said. This week the National Institute of Economic and Social Research (NIESR) became one of the first forecasters to predict a recession in the second half of this year. Should we be bracing for a recession on top of the current cost of living crisis?
Hinesh Patel, portfolio manager at Quilter Investors told Express.co.uk: “UK GDP has come in weaker than expected for Quarter 1 in March as the economic toll of inflation begins to bite.
“January was the only positive month of the quarter as the Russia-Ukraine conflict caused supply chain woes across industrial sectors and compounded to weigh on economic growth.
“Consumer-facing services took a hit in the month of March with a fall of 1.8 percent, suggesting the public concerns around the cost of living are real but it is potentially too early to read into their behaviour just yet.
“They may have accumulated a wall of savings during the pandemic but now they could be beginning to hold that money back for impending price rises.”
Mr Patel predicted things are only going to get worse for UK household finances as 2022 continues.
He continued: “Ultimately things are only going to get worse for consumers.
“Energy bills are expected to soar again later this year when the price cap is reassessed, while inflation is proving stickier than expected.”
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“They are in aggressive rate-raising mode for now, but this cannot remain the case for long given the economic issues already starting to play out.
“With talk of recessions and weak global growth, they cannot afford to choke the economy to the point where they exacerbate the problem.
“Nimble monetary policy will be required, something that hasn’t necessarily been on show in the last six months.”
UK unemployment currently sits at 3.8 percent as of April, according to the ONS, which is 0.2 percentage points lower than March.
But even if unemployment remained low in the UK, Brexit and the coronavirus pandemic have contributed massively to shortages of workers, and the workforce is consequently smaller than it was before both hit.
The slow rate of growth is not keeping pace with the cost of living crisis that is causing severe financial difficulties for households up and down the UK.
So, recession or stagflation, the UK’s economic woes are predicted to continue for some time.