UK economy gathered momentum in April as GDP rose 2.3%

The UK economy gathered momentum in April as shops, hairdressers and restaurants serving outdoors re-opened for business after months of lockdown to fight the coronavirus.

Gross domestic product rose 2.3 per cent from March, despite unexpected declines in manufacturing and construction, the Office for National Statistics said Friday. The gain left output just 3.7 per cent below its level in February last year before the pandemic struck.

The figures indicate soft patches in Britain’s recovery from its worst recession in three centuries and will fuel debate about when the Bank of England should rein in its stimulus program. A rapid vaccination program means the UK is now set for its strongest growth in decades.

Trade provided a boost for this month’s figures, shaking off disruptions following Britain’s exit from the European Union.

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Exports of iron and steel boosted the latest data, delivering a 2 per cent gain in merchandise exports to the EU in the month. Imports from the bloc added 3.2 per cent. Goods coming from non-EU countries, excluding precious metals, were the highest since records began in January 1997.

Surveys indicate businesses are preparing to step up investment and households are splurging savings built up during more than a year of restrictions.

BOE Chief Economist Andy Haldane, who cast a lone vote last month for the central bank to scale back its stimulus program, this week said inflation could remain above the 2 per cent target for longer than many assume.

His colleague Gertjan Vlieghe says policy makers could raise the benchmark rate as early as next year if the labour market recovers smoothly when the government’s furlough support ends in September.

The expansion in April was the fastest in nine months, and the economy received a further boost in May with the reopening of the indoor hospitality and entertainment sector.

UK prime minister Boris Johnson is expected to delay the final stage of lockdown easing that had been planned for June 21st due to the spread of the highly transmissible Covid-19 variant first identified in India.

Services grew 3.4 per cent, almost double the gain of the previous month, driven by a surge in retail sales. That helped the economy overcome declines in other sectors.

Industrial production fell 1.3 per cent in April after posting a larger gain the month before, largely because of plant closures and a slip in mining and quarrying activity. Manufacturing fell 0.3 per cent due to a drop in output in pharmaceutical products.

Construction dropped 2 per cent after a 5.8 per cent gain in March. Economists had expected growth across all sectors of the economy to produce a 2.4 per cent gain in GDP for the month.

UK chancellor Rishi Sunak said: "Today's figures are a promising sign that our economy is beginning to recover.

“With more than a million people coming off furlough across March and April and the number of employees in work rising, it is clear that our plan for jobs is working.

“But I know there are people who still need our support, which is why the furlough scheme is in place until September to protect as many jobs as possible, and schemes like Kickstart will continue to create jobs for young people, as we look to build the economy of the future.”