Recession fears despite UK economy growing in April; Vodafone-Three mobile merger announced – business live

Good morning, and welcome to our rolling coverage of business, the financial markets and the world econony.

At 7am we discover how the UK economy fared in April, when the latest growth figures are released.

Economists predict the UK returned to growth in April, with GDP tipped to have risen by 0.2% despite high inflation, rising interest rates and disruption caused by strikes.

The economy shrank by 0.3% in March, meaning the economy only grew by 0.1% in the first quarter of this year [although this data may be revised]. That left the UK at the bottom of the G7 growth league since the pandemic, behind Germany, France and the US.

Related: UK’s growth last of G7 after economy shrinks by 0.3% in March

But the UK has defied fears of a recession, so far anyway, with the economy showing more resilience than expected, assisted by easing energy costs after last year’s spikes.

Michael Hewson of CMC Markets sets the scene…

As we look to today’s UK April GDP numbers, we’ve just come off a March contraction of -0.3% which acted as a drag on Q1’s 0.1% expansion. The reason for the poor performance in March was due to various public sector strike action from healthcare and transport, which weighed heavily on the services sector which saw a contraction of -0.5%.

The performance would have been worse but for a significant rebound in construction and manufacturing activity which saw strong rebounds of 0.7%.

This isn’t expected to be repeated in today’s April numbers, however there was still widespread strike action which is likely to have impacted on public services output.

The strong performance from manufacturing is also unlikely to be repeated with some modest declines, however services should rebound to the tune of 0.3%, although the poor March number is likely to drag the rolling 3M/3M reading down from 0.1% to -0.1%.

Also coming up today

Today’s GDP report comes amid turmoil in the UK mortgage markets, as lenders scramble to reprice deals as UK borrowing costs soar.

Yesteday, the interest rate on a two-year UK government bond jumped over the levels hit during Liz Truss’s disastrous premiership, following faster-than-expected wage growth this year.

Yesterday, the governor of the Bank of England, Andrew Bailey, warned that inflation was “taking a lot longer” than hoped to come down.

He told the House of Lords economic affairs committee:

“We still think the rate of inflation is going to come down, but it’s taking a lot longer than we expected.”

Related: UK borrowing costs soar above levels of Liz Truss premiership

Tonight America’s central bank sets interest rates, with many forecasters predicting the Federal Reserve will pause its cycle of higher borrowing costs.

Yesterday, US inflation dropped to 4% in May, bringing some relief to households (and some envious looks from the Bank of England’s headquarters…).

Related: US prices rose 4% over the last year as Fed considers pause in rate hikes

That pushed stock markets higher yesterday, as Danni Hewson, head of financial analysis at AJ Bell, explains.

“With US inflation coming in at the lowest print in more than two years markets have taken the bull by the horns and run.

Both the S&P and Nasdaq have surged to fresh 2023 highs as investors buy into speculation that the Fed will indeed pause its rate hiking cycle this month, even if what happens in the months beyond remains uncertain.

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