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Financial News: UK Economy Rebounds In May

UK Economy Rebounds In May

07/11/2024 - 04:00:00 (RTTNews)

(RTTNews) - The UK economy rebounded at a faster-than-expected pace in May underpinned by broad-based expansion in services, manufacturing and construction industries, official data showed on Thursday.

Real gross domestic product grew 0.4 percent in May after showing no growth in April, the Office for National Statistics reported. The actual growth was double the expected 0.2 percent expansion.

The growth flatlined in the first month of the second quarter after wet weather damped consumer spending and construction activity.

Services output expanded 0.3 percent in May and became the biggest contributor to the growth.

Industrial production grew 0.2 percent, reversing a fall of 0.9 percent in April. Within in total production, manufacturing rebounded 0.4 percent following a 1.6 percent decline. At the same time, construction output was up 1.9 percent.

In the three months to May, real GDP advanced 0.9 percent from the previous three months underpinned by the 1.1 percent increase in services output.

The three-month GDP growth was the strongest since January 2022. Production showed no growth, while construction shrank 0.7 percent.

GDP grew 1.0 percent in the three months to May from the same period last year. In May alone, annual economic growth was 1.4 percent.

After the landslide victory of the labor party, new Chancellor Rachel Reeves said growth is the government's national mission. She said the new government will rebuild Britain and make every part of the country better off.

The increase in GDP in May was the fourth increase in the past five months, which supports the idea that the dual drags on activity from higher interest rates and higher inflation are starting to fade, Capital Economics' economist Ashley Webb said.

The Bank of England will cut interest rate by a quarter point to 5.00 percent at the next policy meeting in August, although the timing of the first cut will be heavily influenced by June's inflation and May's labour market data releases next week, Webb noted.

ING economist James Smith said the BoE is likely to start cutting rates and three cuts are expected in total this year.

Another official data today showed that the visible trade deficit narrowed to GBP 17.9 billion in May from GBP 19.4 billion in April. Meanwhile, the surplus on services trade remained almost unchanged at GBP 13 billion.

As a result, the total trade deficit narrowed to GBP 4.89 billion from GBP 6.4 billion in the previous month.

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