"With wages and prices continuing to rise the Bank of England is expected to raise rates further to stem inflation."
Monthly GDP is estimated to have grown by 0.2% in April, after a fall of 0.3% in March, the latest ONS statistics show.
Looking at the broader picture, GDP grew by 0.1% in the three months to April, meaning the UK continues to avoid a technical recession.
The services sector grew by 0.3% in April, following a 0.5% fall in March, and was the main contributor to the growth in monthly GDP in April.
Output in consumer-facing services grew by 1.0% following a fall of 0.8% in March.
However, production output fell by 0.3%, after growth of 0.7% in March, while the construction sector fell by 0.6% following previous growth of 0.2%.
Industry experts predict that the UK economy's resilience mean more rate hikes are to come, with the next decision due next week.
Ben Laidler, global markets strategist at eToro, commented: "The UK economy has again confounded the sceptics and side-stepped recession, with GDP rebounding 0.2% last month, and rising 0.1% the past three months. But this masks an increasingly two-speed economy and continued price pressures.
"Services is three-quarters of UK GDP and supporting the economy, with unemployment low and pandemic savings still being spent down. The manufacturing sector however appears to still be suffering a post-pandemic hangover and is firmly in recession.
"This resilient overall economy is good news for many but is also helping keep inflation at some of the world’s highest levels. This will keep the Bank of England on the interest rate hiking front foot at least through its June 22nd meeting."
Nicholas Hyett, investment analyst at Wealth Club, 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.”
George Lagarias, chief economist at Mazars, commented: "Despite positive number for April, British growth remains anaemic. It is difficult to be optimistic for the months ahead. Policymakers have weighed their options and have expressly decided that beating inflation is more important than fostering growth. With GDP growth near zero, this clearly means a recession. Markets expect the Bank of England to hike four more times. The Chancellor has already said he’d be comfortable with a recession as long inflation is beaten. Businesses and consumers should be prepared for further loss of output in the coming months. The question going forward is not about the direction of travel, but about the severity of the downturn."
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, added: “Today’s GDP growth of 0.2% proves that the UK economy opened the latest quarter more strongly than the previous quarter, boosting the possibility that economic activity will be resilient enough to help the UK sidestep a recession. However, it is far too soon to call the ‘all clear’, particularly with the Bank of England poised to remain on its rate-hiking mission to suppress inflation that remains too high for comfort.
“Following March’s dip in economic activity fuelled by industrial action, April saw fewer days lost to strikes and was accompanied by the retail sector springing back to action. Manufacturing and industrial production remain resilient after a solid first quarter, supported by a positive trend in vehicle production, gas output and mining activity.
“While the UK economy is proving rather more resilient than its Euro Area counterpart, there remain grounds for continued caution. Consumer spending continues to be smothered by relentless inflation and households are under growing pressure from rising mortgage rates. Given these ongoing squeezes, a Herculean effort will still be required to avoid a recession.”
