The UK economy shrunk in April new figures reveal, as experts warned the country is heading for recession. Gross Domestic Product (GDP) fell by 0.3% official date from the Office for National Statistics (ONS) released today shows. The latest data comes as millions of Brits face a crippling cost of living crisis.
Energy bills and fuel are among the everyday costs shooting up as inflation has hit 9% – and could still climb higher this year. The country’s leading business group has warned that Brits face the biggest squeeze on their finances since the 1950s. The CBI also says Britain is on the brink of recession.
The oil price dipped, as a new Covid-19 outbreak in China raised fears of fresh lockdowns. Eurozone government bond prices slid too, on concerns that the European Central Bank plans to start raising interest rates next month.
Craig Erlam of OANDA explains: We all sensed the change in tone from ECB President Lagarde last week; the central bank is now extremely concerned about inflation and knows it needs to act urgently (by its own standards) and aggressively.
European stocks have been tumbling ever since while European yields have taken off again, with the Italian 10-year today hitting 4% for the first time since early 2014. Almost 10 years after Draghi’s famous “whatever it takes” speech, the ECB has a real job on its hands managing surging yields in the periphery
The US yield curve inverted – a sign that the US economy could be heading for recession. The surge in US inflation to 40-year highs on Friday has unnerved investors. As Kit Juckes of Société Générale puts it:
The US CPI data wasn’t that much worse than expected but the market was over-invested in the idea that inflation has peaked. We’re still seeing waves of price pressure crashing through the economy one after another, and while each wave may be ‘transitory’, they keep on coming and will do so until US demand has softened significantly.
The policy challenge is that the Fed has no idea how much monetary tightening is needed and will only find out it has done too much, long after the event. And we know what happens then. There are widespread losses in crypto, with Bitcoin tumbling by 20% since Friday night, as cryptocurrency lending platform Celsius Network halted withdrawals because of “extreme market conditions”
