Yahoo Finance UK economy grows by 0.4% in May
The UK economy grew faster than expected in May as it bounced back from wet weather the month before, according to official figures.
The Office for National Statistics (ONS) recorded gross domestic product (GDP) growth of 0.4% in the month, following zero growth in April when wet weather hit consumer spending. City economists had forecast growth of 0.2%.
The expansion was led by the services sector, which grew 0.3%. Production rose 0.2%, while construction rose 1.9%.
GDP grew 0.4% in May 2024. Services (+0.3%), production (+0.2%) and construction (+1.9%) all grew on the month.
Read the release 📷 https://t.co/Txf0zBQFiU pic.twitter.com/zr4cORpL3r— Office for National Statistics (ONS) (@ONS) July 11, 2024
Director of economic statistics at the ONS 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."
April was a very wet month, putting consumers off from spending on the high street.
On a quarterly basis, the UK economy grew at the fastest pace in more than two years, expanding by 0.9% in the three months to May compared to the three months to February, driven by a 1.1% rise in services output.
Read more: UK to lose half a million millionaires by 2028
Chancellor Rachel Reeves said: “Delivering economic growth is our national mission, and we don't have a minute to waste. That is why this week I have already taken the urgent action necessary to fix the foundations of our economy to rebuild Britain and make every part of Britain better off. A decade of national renewal has begun, and we are just getting started.”
The new Labour government has prioritised securing economic growth, with measures to date including the creation of a national wealth fund.
George Roberts, head of dealing at global financial services firm Ebury, said: “This morning’s GDP data will put a spring in Sir Kier Starmer’s step as he continues his whistle-stop tour around Europe and the US.
“With Labour’s victory in the polls quelling market fears, inflation back down to target, and the new administration signalling closer ties with the EU, UK businesses will likely be feeling optimistic about the future.”
Borrowers hoping for the first interest rate cut next month may be disappointed after data showing the economy growing faster than predicted in May, the Institute of Chartered Accountants in England and Wales has warned.
Read more: Is the Bank of England expected to cut interest rates in August?
Economics director Suren Thiru said: “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.”
Yael Selfin at KPMG said: “The near-term outlook for the UK economy has continued to improve, and we now expect growth to reach 0.8% this year and 1% in 2025. Consumer spending is set to be the main driver of activity in the second half of the year, underpinned by stronger consumer sentiment and improving household incomes.”
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