Danni Hewson, AJ Bell financial analyst, comments on the latest GDP figures, GDP monthly estimate, UK - Office for National Statistics (ons.gov.uk)
“Latest GDP figures show that the UK economy is still rattling along the road out of restrictions, but the speed has slowed. Unsurprisingly the biggest contributor to growth in May has come from bars and restaurants being able to welcome people back indoors. Just as well because May’s inclement weather also gave a boost to energy producers as we all had to adjust the thermostat.
“As consumers dug into restaurant meals, they trimmed back their spend on food at places like supermarkets. And it’s clear a long hard winter has given people a huge appetite for socialising and, though social distancing restrictions have kept sales way below pre-pandemic levels it’s interesting to note they were above those seen last summer when Eat Out to Help Out was brought in. I dare say there may be a few uncomfortable conversations taking place in the treasury today.
“Businesses hoping to make the most of pent up demand have given the construction sector a boost with the amount of cash spent on repairs and reconfigurations up by more than £300m compared with pre-pandemic levels although a fall in new building work, likely a result of the aforementioned rain, saw the sector contract for another month. But building work is still hovering above pre-pandemic levels and as the housing sector finds its level now the stamp duty holiday is tapering, new work is likely to pick up once again as long as supply of materials and labour doesn’t constrain things.
“One indication of how fragile recovery is and how one cog out of place can put a spoke in the wheel is the impact of the global semi-conductor shortage on the production of transport equipment which experienced the largest fall since April 2020. With supply not expected to return to normal levels until the end of the year and demand only going one way you can understand why Boris Johnson is taking a look at the sale of the UK’s only producer of these precious chips to a Chinese company.”
“Overall, the message is one of cautious optimism. There will be some who will see May’s figures as disappointing, but recovery won’t go in a straight line, there will be peaks and troughs and yes maybe the odd U-turn. But the economy is growing and consumers are spending. The last year’s shock has made people a little cautious and we shouldn’t expect all the pent-up pennies to be spent at once. People know this journey isn’t over and it’s only sensible to keep a little something back for a rainy day, or for that foreign trip they might now be able to take.”
