GDP latest: UK recovery continues but may be 'losing a little steam'

The UK’s economic recovery is “losing a little steam”, business leaders have cautioned, after the release of the latest official GDP figures.

The Office for National Statistics (ONS) said gross domestic product – a measure of economic growth – grew by 0.8 per cent month on month in May, slowing markedly from a 2.3 per cent hike in April.

Analysts had predicted the economy would report a 1.5 per cent increase for the month.

Sign up to our daily newsletter

The i newsletter cut through the noise

The ONS added that GDP has still not recovered to pre-pandemic levels, with the reading 3.1 per cent lower than in February 2020.

May’s economic rebound was largely driven by the services sector, which reported 0.9 per cent growth after a raft of hospitality, leisure and arts firms were able to reopen due to the relaxation of restrictions. Picture: Lisa Ferguson
May’s economic rebound was largely driven by the services sector, which reported 0.9 per cent growth after a raft of hospitality, leisure and arts firms were able to reopen due to the relaxation of restrictions. Picture: Lisa Ferguson

May’s economic rebound was largely driven by the services sector, which reported 0.9 per cent growth after a raft of hospitality, leisure and arts firms were able to reopen due to the relaxation of restrictions in May.

The accommodation and food services sector was particularly buoyant, reporting a 37.1 per cent improvement against April as customers returned to venues and booked domestic holidays again.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “The economy grew for the fourth consecutive month, albeit at a slower pace than seen recently, but remains around 3 per cent below its pre-pandemic peak.

“Pubs and restaurants, who were again able to welcome indoor guests, were responsible for the vast majority of the growth seen in May. Hotels also saw a marked recovery as restrictions lifted.”

Suren Thiru, head of economics for the British Chambers of Commerce, said: “While the latest figures confirm the rebound in economic activity continued into May, the sharp slowdown in growth suggests that the recovery is losing a little steam as the temporary boost, from the earlier phases of reopening, fades.

“The UK economy remains on track for a strong rebound in the second quarter. However, economic activity may remain muted in June as the impact of rising Covid infections and the delay to the end of the roadmap are felt, despite an uplift to consumer activity from Euro 2020.

“Although the July reopening [in England] should provide a notable boost, any recovery may lose momentum if persistent staff shortages and supply chain disruption stifles business activity and rising Covid cases prompt a renewed reluctance among consumers to interact and spend.”

The latest ONS figures also revealed a return to growth for the production sector, at 0.8 per cent, as it was boosted by adverse May weather which drove higher output in electricity, gas and air supply.

Meanwhile, the construction sector slipped for a second consecutive month, falling by 0.8 per cent, but remains slightly above pre-pandemic levels.

The ONS also said that car production suffered its biggest fall since the UK was first hit by lockdown measures last year.

Robert Alster, chief investment officer at wealth manager Close Brothers Asset Management, said: “While these figures are lower than April’s and markedly lower than had been anticipated, they are still relatively strong growth numbers – particularly as the restrictions on indoor hospitality were only lifted in mid-May.

“Moving forward, focus will shift to the night time hospitality economy and the extent to which it is able to bounce back from its enforced closure.”

Read More

Read More
GDP revisions: UK economy suffers worst decline in 300 years but autumn bounce-b...

A message from the Editor:

Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions

 0 comments

Want to join the conversation? Please or to comment on this article.