UK economy shrank by 0.3% in April, biggest fall since October 2023, as trade with the US slumped
The drop in UK GDP in April increases the chances that the Bank of England cuts interest rates this summer, economists predict.
Paul Dales, chief UK economist at Capital Economics (who had correctly predicted April’s 0.3% fall in GDP) says:
“The 0.3% m/m fall in real GDP in April supports our view that the strength in Q1 was unsustainable. This won’t prompt the Bank of England to cut interest rates next Thursday. But it is one more piece of news pointing to another cut in August.”
We still expect the Bank Rate to be maintained at 4.25% in the June meeting, to allow still troubling earnings growth to continue to ease. We anticipate the next rate cuts to occur in the August and November meetings to 3.75%, prompted by mounting economic hardships.”
While there is little chance of any change at next week’s meeting, we see a strong possibility that the MPC ditches its hawkish bias, which could pave the way for an August cut.”
“We know that April was a challenging month.
“There was a huge uncertainty about tariffs, and one of the things, if you dig into those GDP numbers today, is exports weakening and also production weakening because of that uncertainty in the world around tariffs.”
