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Flat GDP in April won’t encourage ratesetters to cut

12 June 2024

The slowdown isn’t evidence enough for the Bank of England to start cutting rates, experts say.

By Matteo Anelli,

Senior reporter, Trustnet

Monthly real GDP is estimated to have shown no growth in April, the Office for National Statics (ONS) has announced today.

Following a stunted 0.4% uptick in March, experts are now blaming the weather for the disappointing figure of last month.

Lindsay James, investment strategist at Quilter Investors, said: “Persistent rain has kept consumers from spending and caused economic growth to grind to a halt, with sectors such as retail, construction and pubs all severely impacted”.

AJ Bell head of financial analysis Danni Hewson also wasn’t surprised by the reading, as ‘rain stopped play’ for builders, who shunned roof tops, as well as for shoppers, who deserted high streets in favour of their warm, dry sofas.

The figure hides a weak outcome for manufacturing, construction and industrial production, which worries Hewson. Output has fallen for three consecutive months, with “little surprise” that so much focus has been placed on housebuilding by political parties, all hoping their policies can deliver a sustained growth spurt for the UK.

There also was a stronger-than-expected services sector, however, which was possibly driven by ongoing wage growth, according to Neil Birrell, chief investment officer at Premier Miton.

But this slowdown won’t be moving the needle at the next meeting of the Monetary Policy Committee on 20 June.

“No one set of numbers will drive the Bank of England’s interest rate decision, but policymakers will now be looking to inject some stimulus as soon as they feel it is safe to do so," he said.

James echoed this, noting: “Wage inflation remains elevated and consumer price inflation is expected to tick higher in the coming months, and thus the Bank of England won’t want to deviate from its strategy just yet.”

On a positive note, the weather has improved of late, likely boosting May’s reading, according to James. Hewson also registered “a frisson of excitement in the air” that big events such as the UEFA Euro Cup and Taylor Swift’s Eras tour will help deliver “a decent boost” to the economic picture by the time we get the half-year result.

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