1 of 2 | A fall in motor trade activity was a major downward factor in Britain's economy contracting by 0.3% in March, according to the Office for National Statistics. File photo by Phil McCarten/UPI | License Photo
May 12 (UPI) -- Britain extended depressed growth into a second month in March with the economy shrinking 0.3% as a services sector slump deepened, led by weak car sales and retail sales dampened by high prices and one of the wettest months on record, the country's main statistical agency said Friday.
The performance follows GDP flatlining in February but the economy managed to stay in the black in the first quarter by the slimmest margin eking out growth of 0.1%, according to estimates from the Office for National Statistics.
That comes after the economy stalled last summer and has since flirted with, but managed to narrowly avoid, two straight quarters of negative growth -- the technical definition of a recession. The ONS said the economy was now roughly the same size as it was pre-COVID-19 in February 2020.
The figures are in line with Bank of England forecasts Thursday that the economy will not now go into recession this year despite weak growth and persistent double-digit inflation that forced the central bank to raise interest rates for the 12th time in a row to their highest level in 15 years
February's contraction was led by a 0.5% decline in services within which motor trades and retail made the most significant contributions. ONS said while car sales were at their strongest since March 2019 they had still not returned to pre-pandemic levels while retail was hit particularly hard by declining food store sales amid food inflation of more than 19%.
"The fall in March was driven by widespread decreases across the services sector," said ONS Economic Statistics Director Darren Morgan in a Twitter post.
Morgan added that "car sales were low by historic standards -- continuing the trend seen since that start of the pandemic -- with warehousing, distribution and retail also having a poor month."
The ONS also said that the nation's sixth wettest March since 1836 may have dragged down some industries, noting it previously reported a 0.9% decline in retail sales for the month, led by a surprise 1.3% drop in department, clothing and jewelry store spending amid the poor weather.
Morgan said the declines were counterbalanced, in part, by strong manufacturing and growth in gas production and distribution, as well as in construction.
"Across the quarter as a whole growth was driven by IT and construction, partially offset by falls in health, education and public administration, with these sectors affect by strikes," said Morgan.
The Labor opposition's shadow chancellor for the exchequer Rachel Reeves said the GDP figures showed the government was failing to act to halt a steady economic decline.
"GDP forecasts today show the Tories are continuing to drag us down a path of managed decline. Families are worse off and our country is lagging behind," said Reeves.
"Labor will match the ambition of the British people -- with our mission to secure the highest sustained growth in the G7."