UK economy returns to growth in May as GDP rises by 0.4% | Personal Finance | Finance

The UK economy grew quicker than expected in May as more shoppers returned to high streets and construction work recovered, according to official data.

The Office for National Statistics (ONS) said gross domestic product (GDP) increased by 0.4 percent in May. It came after no growth was recorded in April when damp weather hit consumer spending.

Economists had predicted that GDP would increase by 0.2 percent in May.

ONS director of economic statistics Liz McKeown said: “The economy grew strongly in May, with all the main sectors seeing increases. Many retailers and wholesalers had a good month, with both bouncing back from a weak April.

“Construction grew at its fastest rate in almost a year after recent weakness, with housebuilding and infrastructure projects boosting the industry.”

Ms McKeown added: “Across the last three months as a whole, the economy grew at its quickest pace for over two years with strong growth across services, partially offset by the weaker longer-term performance from construction.”

According to ONS data, all three main sectors contributed positively to GDP growth in May 2024. Services output grew by 0.3 percent in May 2024 and was the largest contributor to the growth in GDP during the month.

Production and construction output also increased by 0.2 percent and 1.9 percent, respectively.

Responding to the data, Suren Thiru, ICAEW Economics Director, said the figures confirm a “robust rebound” in economic activity however, the new Government faces an “uphill struggle”.

Mr Thiru said: “These figures confirm a robust rebound in economic activity as stronger services and construction output helped return the economy to growth.

“May’s GDP uptick may well have been followed by a June washout, with wet weather likely to have stifled output from key sectors of the economy, despite a helping hand to hospitality and some retailers from Euro 2024.

“Longer-term, the new government faces an uphill struggle to achieve its ambition to significantly uplift the UK’s growth trajectory, unless it can substantially increase productivity and tackle economic inactivity.

“These GDP figures may make an August rate cut less likely by providing those rate-setters, who are concerned about underlying price pressures, with sufficient confidence about the UK’s economic recovery to continue putting off loosening policy.”

Other analysts suggest the rebound provides positive momentum for the new Labour Government despite potential slight slowdowns in June.

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services said: “After treading water in April, this morning’s data from the ONS shows that the UK’s economy regained strength in May. This growth was bolstered by a resilient service sector, strong growth in retail sales and a significant rebound in industrial activity after a weak prior month for manufacturing.

“Business surveys foreshadowed this rebound in manufacturing and industrial output, with confidence hitting a two-year high. Construction activity remained dampened following wet weather in April, while May’s warm weather weakened demand for gas and electricity. Nonetheless, the positives outweighed the negatives.”

Mr Batstone-Carr added: “This comes as positive news for the new Labour Government. Even if June figures were to show that economic activity slowed slightly, this would still generate 0.5 percent growth over Q2, matching the Bank of England’s expectations and providing a helpful tailwind to the new Chancellor, as the Autumn Budget begins to loom over the horizon.”

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