Economists say the double blow from the slowdown in growth after the lockdown and the rise in the cost of living after the Russian invasion of Ukraine could lead to a drop in GDP for two consecutive quarters, which is the definition of recession. After a weaker-than-expected growth performance in February and with inflation hitting the highest level since 1992 last month, city forecasts said the UK’s GDP was now well on its way to growing by around 1%. in the first quarter of 2022 before slipping. vice versa this summer. Analysts said activity would be reduced by an additional bank holiday for the Queen’s platinum jubilee in July, as public holidays usually lead to a drop in overall economic output. The return to lower rates of health activity following a winter rush to vaccinate people against Covid-19, as well as households cutting back on spending amid rising costs of living, is also expected to affect growth. James Smith, an economist at the Dutch bank ING, said the economy was likely to shrink in the second quarter. The bank forecasts a 0.3% contraction in the quarter to the end of June, followed by growth of just 0.2% in the third quarter. “It will be very close to a technical recession. “Even if one is avoided, we will continue to see only a few non-exciting growth numbers,” Smith said. “If people spend more money on energy, one would expect some of the non-essentials to be reduced in sales volume. “We will monitor this,” he added. National Statistics figures to be released on Friday this week are expected to show a drop in retail sales in March as households tighten their belts. It comes as retail bosses warn of a slowdown in sales amid rising living costs. Neil Shearing, chief group economist at consulting firm Capital Economics, said disposable household income is expected to fall by about 1.9% this year. This is more than the 1.8% drop in real incomes in 1977 and the largest since modern records began in the 1950s. “By comparison, real incomes fell by ‘only’ 1.5% in 2011 after the global financial crisis,” he said. “With the economy already close to normalization, it clearly would not take long to produce a month or two of declining output.” The warnings come after the head of the International Monetary Fund, Kristalina Georgieva, said global growth would slow this year and next, as shockwaves from Covid and the war in Ukraine keep inflation higher than ever. The strength of the British economy will depend to some extent on the households that saved during the pandemic and will continue to spend. However, while nearly 250 250 billion was raised during the lockdown, most of it was raised in more affluent families who could continue to work from home, meaning those at greater risk of rising cost of living will feel the greatest pressure. Thomas Pugh, an economist at RSM UK accounting firm, said he expected households to probably need to dive into savings or borrow to protect themselves from rising inflation. “This is a key reason why we believe the UK will avoid a recession this year. However, our forecasts show that GDP growth will average just 0.1% in each of the remaining three quarters of this year – so it would not take much for oil prices or supply chain disruptions to push the United Kingdom in recession. he said.
