“Households are under renewed pressure as energy and petrol prices climb. Food costs are also expected to rise, with disruptions to fertilisers and other essential inputs. With energy and food accounting for a significant share of household spending, these increases are likely to weigh on disposable incomes, dampening demand and posing a significant challenge to economic activity over the coming months.
“Heightened investor concerns have pushed up borrowing costs which are likely to weigh on business confidence at a time when firms are already facing elevated cost pressures. Firms may respond by scaling back or delaying investment plans, which will act as an additional drag on growth.
“While headline growth was relatively robust in the first quarter, with GDP rising by 0.6%, and a relatively strong increase of 0.3% in March, the adverse effect of the war in Iran on the economy is likely to show in the second quarter. We expect growth to slow, as higher costs and softer demand continue to weigh on activity.”
