Figures show UK economy shrank in March

Bank of England predicts trend will continue and even worsen this year

The rapidly rising cost of high-street products in the United Kingdom, coupled with shrinking disposable income caused by bigger heating bills, new taxes, and poor wage rises, cooled spending and nudged the nation toward recession during March.

The latest figures from the Office for National Statistics, or ONS, show the UK economy shrank during March by 0.1 percent. The bad news followed the country's official statistician recording no growth at all during February.

However, the poor performance during February and March followed a relatively good January, which meant the economy grew slightly, overall, during the first quarter-by 0.8 percent. An economy is deemed to be in recession if it shrinks for two straight quarters.

"You can see the cost of living really beginning to bite," Darren Morgan, director of economic statistics at the ONS, told the BBC.

He said people have even cut down on journeys in an attempt to save money in the face of more expensive gasoline and diesel.

Morgan said gross domestic product, or GDP, also fell during March, "with drops in both services and in production".

But he said: "Construction… saw a strong month, thanks partly to repair work after the February storms."

The Bank of England has made it clear the economic trends seen during February and March are likely to continue and become more pronounced as 2022 continues, with price inflation predicted to hit 10 percent by the year's end and with economic contraction expected during the final three months of 2022 and into 2023, when the economy is expected to shrink by an additional 0.25 percent.

The poor performance during March was even worse than economists had braced for, The Guardian newspaper noted.

It said the ONS assessment will increase pressure on Chancellor of the Exchequer Rishi Sunak to help people who are struggling the most.

The opposition Labour Party's shadow chancellor, Rachel Reeves, told the paper the chancellor should address the situation through an ad hoc mini-budget.

The London-based business and finance newspaper City A.M. said on Thursday the poor figures caused concern in financial markets that the nation was "hurtling toward a period of stagflation", which is a term used to describe persistent high inflation, high unemployment, and stagnant demand.

The paper said that concern sent London's FTSE 100 index tumbling by more than 2 percent on Thursday morning trading.

The paper said the prospect of increasingly poor economic performances prompted investors to ditch stocks and buy government bonds instead.

However, Thursday's news was not all bad. Reuters reported consumer spending in the UK appeared to have improved during the first week of May, with spending on credit and debit cards up, and restaurant reservations growing.

Card spending was up 110 percent on its February 2020 average, and 8 percentage points up on the previous week.