“The impact of the energy shock is continuing to dampen prospects for a sustained recovery in consumer spending. Households are set to see a significant increase in their energy bills from next month, while energy supplies have not yet normalised, leaving the risk of a further rise in the autumn. In response, consumers have signalled their intention to cut back on purchases and increase their savings, which will weigh on economic activity.
“Businesses continue to face pressure from elevated energy and input costs. However, in contrast to 2022, subdued domestic demand is limiting firms’ ability to pass these higher costs on to consumers, which is likely to squeeze profit margins. This could lead firms to scale back investment plans, particularly against the backdrop of higher borrowing costs and geopolitical uncertainty.
“While UK GDP grew by 0.7% in the three months to April, the contraction in April is more indicative of growth prospects for the economy going forward. We expect UK GDP growth to slow in the second quarter.”
