The UK economy bounced back in April, recovering most of the output lost the previous month when heavy rain and strikes curtailed consumer spending.

Gross domestic product rose 0.2% after a 0.3% decline in March, the Office for National Statistics said Wednesday. The figures left the economy 0.3% bigger than pre-pandemic levels.

The positive start to the second quarter was driven by the dominant services sector, which had been hit by the wettest March in England and Wales for over 40 years and workers walking off the job in schools, hospitals and railways. 

However, hopes that Britain can avoid a recession widely predicted last year are receding as markets bet the Bank of England has more to do in its battle to tame inflation that's running at more than four times the 2% target.

A quarter-point rate hike to 4.75% this month is now seen as a done deal after stronger-than-expected labor market data Tuesday. Traders are pricing in the possibility of an increase to 6% by February. That's driving up mortgage rates, adding to the pressure on household budgets.  

Economists were already predicting only modest growth this year. The 0.2% expansion in the latest Bloomberg survey puts Britain on course for the weakest performance except in Germany among Group of Seven countries.

The UK along with Germany are the only major developed economies that have yet to recover the output lost during the pandemic. Britain may not do so until the middle of next year.

That's bad news for Prime Minister Rishi Sunak, whose Conservative Party trails the Labour opposition by double-digits in opinion polls ahead of a general election that has to be held by January 2025 at the latest. 

Source : Bloomberg