Here is our story on the UK’s return to growth in May.
Monthly GDP is now estimated to be 1.7% above its pre-pandemic levels (February 2020).
Production grew by 0.9% in May, driven by 1.4% growth in manufacturing and a 0.3% rise in electricity, gas, steam and air conditioning supply.
Construction output increased by 1.5% in May and is now at its highest level since monthly records began in 2010.
Services output rose 0.4% in May, as human health and social work activities grew by 2.1%. There was a “large rise in GP appointments” in May, which offset the scalding down of the NHS test and trace and Covid-19 vaccination programmes, the ONS said.
The new chancellor of the exchequer, Nadhim Zahawi, was quick to respond to the figures.
It’s always great to see the economy growing but I’m not complacent. I know people are concerned so we are continuing to support families and economic growth.
We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK.
The UK economy has surprised us with 0.5% growth in May, following April’s 0.2% decline (revised from a 0.3% drop). Growth was fuelled by a boom in holiday bookings and a large rise in GP appointments.
And over the three months to May, GDP rose 0.4%, according to figures from the Office for National Statistics. Economists had expected zero growth in May alone, and in the three months to May, amid the cost of living crisis.
News overnight: Twitter sued Elon Musk on Tuesday to force him to complete his $44bn takeover of the social media giant after he announced on Friday he would withdraw his bid, writes our west coast technology reporter Kari Paul.
“Musk’s exit strategy is a model of hypocrisy,” the lawsuit said, accusing the billionaire of making “bad faith” arguments against Twitter and carrying out “public and misleading attacks” on the company.
The suit has kicked off what could be a long legal saga regarding the failed merger. The Tesla CEO and richest man on Earth had reached a deal to buy Twitter on 25 April, offering to purchase all of the company’s shares for $54.20 each, but he began to back out over allegations of “spam” accounts on the platform.
The UK’s failure to get serious about inequality and weak growth over the past 15 years has left the average British household £8,800 poorer than its equivalent in five comparable countries, research has found, writes our economics editor Larry Elliott.
A “toxic combination” of poor productivity and a failure to narrow the divide between rich and poor had resulted in a widening prosperity gap with France, Germany, Australia, Canada and the Netherlands, the report from the Resolution Foundation said.
The thinktank said that if the UK matched the average income and inequality levels of those countries, typical household incomes in Britain would be a third higher and those of the poorest households two-fifths greater.
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
We will get a new health check on the UK economy this morning as May’s GDP numbers are released.
The official data, due at 7am BST, comes amid concerns that Britain could be hurtling towards recession, as households and businesses are gripped by a cost of living crisis.
Analysts are forecasting that Britain’s economy ground to a halt in the three months to May, following 0.2% growth in the previous three months. GDP in May alone is also forecast to show no change, after April’s 0.3% decline.
We are also getting UK trade and industrial production figures at the same time, as well as the final estimate for German inflation in June (forecast: 7.6%), followed by final estimates for French and Spanish inflation a bit later.
Michael Hewson, chief market economist at CMC Markets UK, said:
The most recent April GDP numbers showed that the UK economy contracted by 0.3%, a much bigger decline than was expected. On the face of it the numbers were very disappointing, however the fall was largely driven by the end of the NHS test and trace program, as the Covid free testing regime came to an end. Given that this is a one-off effect, and won’t be repeated, the actual numbers, although poor, weren’t as bad as they appear, despite the difficult macro backdrop.
As we look to today’s May numbers the outlook isn’t likely to improve significantly even if we see a modest improvement. Fuel prices are set to go even higher with daily reports of record highs for diesel as well as petrol, as it becomes more and more expensive to fill up. At some point this will lead to demand destruction as consumers prioritise spending on essentials.
Philip Shaw, chief economist at Investec, said:
It is likely the rising cost of living continued to impact the UK economy, which is unlikely to be offset by a potential rebound in the production sector from a weak April. We expect that UK GDP contracted by 0.2% in May, relative to April.
What will likely be the most-watched release is the US CPI [consumer price index] report. Last month’s unexpected jump to 8.6%, when many thought inflation had peaked, helped trigger the Fed’s 75 basis point rate increase.
This afternoon, the highlight is US inflation for June, with economists forecasting a rise to a new 40-year high of 8.8% from 8.6%.
The Bank of Canada is expected to raise interest rates again today, by 75 basis points to 2.25%, foreshadowing a similar move by the US Federal Reserve at the end of this month.
On the markets, the euro remains in focus. The single currency was within a whisker of hitting parity against the dollar yesterday, hit by fears of recession and an energy supply crisis, and sank to $1.00001 at one stage. It is now trading at $1.003, its lowest level in 20 years and down almost 12% this year. The pound also hit a fresh two-year low below $1.19 yesterday, and is currently at $1.1901, up 0.1% on the day.
Asian stock markets have eked out some modest gains, with Japan’s Nikkei rising 0.4%, Hong Kong’s Hang Seng and the Shanghai composite gave up earlier gains and were flat. European stock markets are expected to slip at the open.
- 9am BST: International Energy Agency oil market report
- 10am BST: Eurozone industrial production for May
- 1.30pm BST: US inflation for June (forecast: 8.8%)
- 3pm BST: Canada interest rate decision (forecast: 2.25% from 1.5%)