UK GDP Growth Slows More Than Expected In May

UK GDP Growth Slows More Than Expected In May

July 15, 2021

The UK economy expanded for the fourth consecutive month in May, albeit at a slower pace and remained below the pre-pandemic levels, data from the Office for National Statistics showed on Friday.

Gross domestic product grew 0.8 percent month-on-month in May, but slower than the revised 2 percent growth posted in April and the economists’ forecast of +1.5 percent. Nonetheless, GDP rose for the fourth straight month.

Data showed that GDP remained 3.1 percent below the pre-coronavirus pandemic levels seen in February 2020.

The production-side breakdown showed that the service sector grew 0.9 percent in May with the easing of coronavirus restrictions.

Output in the production sector returned to growth in May, at 0.8 percent, mainly because of adverse weather conditions in May boosting output in electricity, gas and air supply. However, the pace of growth was weaker than the economists’ forecast of +1.5 percent.

On the other hand, manufacturing output was down unexpectedly by 0.1 percent mainly due to a 16.5 percent decline in the manufacture of transport equipment as microchip shortages disrupted car production. Economists had forecast a monthly growth of 1 percent for manufacturing output.

Moreover, construction output dropped for the second straight month following strong increases in February and March. Output was down 0.8 percent as adverse weather conditions weighed on both new work and repair and maintenance.

In three months to May, GDP grew 3.6 percent in the three months to May, mainly because of strong retail sales over the three months, increased levels of attendance as schools reopened from March, and the reopening of food and beverage service activities.

The muted increase in GDP in May is especially disappointing at a time when some more timely indicators suggest that the economic recovery lost a bit more verve in June, Paul Dales, an economist at Capital Economics, said.

This may mean that the recent rise in COVID-19 cases and the delay to the final easing in COVID-19 restrictions is hampering the recovery, the economist added.

Year-on-year, industrial output gained 20.6 percent, after April’s 27.2 percent increase. At the same time, manufacturing growth moderated to 27.7 percent from 39.1 percent.

Source: Read Full Article