The services sector saw a growth of 0.3% in April 2023, leading to a growth in GDP, following a fall of 0.5% in the sector in March, according to the Office for National Statistics (ONS).

The ONS also reported that GDP grew by 0.2% in April, which fell in March by 0.3%. Overall, in the three months to April 2023, GDP grew by 0.1%.

The services industry was led primarily by wholesale and retail trade, and the repair of motor vehicles and motorcycles, with information and communication services also leading the way.

However, the ONS found that human health and social work activities saw a drop of contributions to GDP, falling by 0.9% in April. This was driven by the human health activities industry following four days of junior doctors strikes, which saw the sector drop by 1.3% compared to March, which only saw three days of strikes.

Investment analyst at Wealth Club, Nicholas Hyett, said: “The services sector continues to set the tone for the UK economy, growing 0.3% in April – driven by vehicle sales and repairs together with an uptick in the TV, film and music industries. In production it was advanced manufacturing that suffered, with declines in pharmaceutical and computer/electronic products, while private housing work held back construction.

“However, more important than monthly shifts in the economy is what the numbers mean for the future direction of interest rates. With wages and prices continuing to rise the Bank of England is expected to raise rates further to stem inflation. GDP growth, albeit modest, creates the space for the Bank of England to be more aggressive in its rate hikes. The chances of a 0.5% rate hike just got higher.”

Further data shows that GDP is now estimated to be 0.3% above the pre-coronavirus levels (February 2020), with production and construction levels growing by 0.2% and 1.6% in April 2023 respectively.

Head of money and markets at Hargreaves London, Susannah Streeter, said: “With consumer spending holding up, particularly in hospitality, and the impact of strikes more minimal, the UK economy has eked out growth in April, but stubborn inflation is still casting a shadow over the slightly sunnier outlook.

“Although the UK continues to swerve a technical recession and buck earlier forecasts, the situation is fragile, with growth of just 0.1% over the three months to April. The construction sector had seen an uptick in activity in March but contracted by 0.6% in April, with customers putting off repair and renovation projects amid uncertainty over the direction of interest rates.

“With recent data showing prices and wages are still rising sharply, further rate hikes could act like a vice-grip on spending power going forward. Fresh strikes have also been called, which are set to continue to act as a drag on growth.”

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