UK GDP Falls Another 0.1% in May, Renewing Growth Concerns
The Office for National Statistics reported that UK GDP fell by 0.1% in May, compounding April’s 0.3% contraction and surprising markets expecting a gain . This signals a potential stall in Q2 recovery after a buoyant Q1.
📊 Sector Breakdown:
| Sector | Change in May |
|---|---|
| Production | –0.9% (auto, pharma, energy) |
| Construction | –0.6% |
| Services | +0.1% |
Services continue to cushion broader weakness, but combined contraction raises alarms about a GDP slowdown.
🌍 Broader Context:
The first quarter’s surge (+0.7%) was driven by businesses accelerating activity before U.S. tariffs and domestic tax hikes, a phenomenon now reversing . Overall quarterly growth sits at just +0.5%, and June must show flat or positive growth to avoid a net Q2 decline .
🏦 Policy Implications:
- Monetary easing expected: Markets now see an August rate cut as almost inevitable, despite inflation pressures .
- Fiscal tightrope: Chancellor Reeves pledges growth, but weak data and higher borrowing costs may force challenging budget decisions, including possible tax increases .
- Business sentiment shaky: Firms are warning that new taxes could deter investment, urging clearer growth incentives .
💡 Expert Insights:
- Surging caution: Economists from ICAEW and CBI note the sequential contractions heighten concerns over mid-year momentum .
- Front-loading effect easing: Analysts expect some rebound in June, but not enough to escape a Q2 slowdown .