- UK GDP rebounded 0.1% in May after a 0.1% fall in April
- The dominant service sector offset falls in both production and construction
- Over three months the economy grew 0.7% – primarily boosted by strength in March
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“Despite pressure on fuel prices and supply chain disruption thanks to the war in Iran, the UK’s economy did manage to eke out a small amount of growth in May after rebounding from a fall the previous month.
“For incoming prime minister Andy Burnham, it’s a positive note to begin on. But 0.1% growth is hardly cause for celebration and certainly nowhere near the momentum needed if ordinary people are going feel the country is working for them.
“Mr Burnham will face tough choices when he finally gets his feet under the desk at Number 10 and there’s been no shortage of speculation and pitch rolling ahead of what many are calling his coronation. Whilst reports that Shabana Mahmood is now front-runner for the position of chancellor do seem to have calmed crucial money markets, nerves about potential tax hikes could create another long autumn of consumer caution.
“Finding the right mix of spending, borrowing and taxation is a kind of alchemy that often feels elusive, and decisions made by Rachel Reeves and Keir Starmer have been blamed for undermining business confidence and impacting hiring, especially of younger workers. Making the right choices is particularly important as technology advances to ensure people aren’t left behind in the race for productivity gains, but cost savings must be factored into government decisions.
“Only the dominant service sector managed to find a forward gear in May, with both production and construction losing momentum.
“The UK might have delivered the fastest growth in the G7 at the start of the year, but it’s a low bar. And the UK’s high levels of debt make it particularly vulnerable to further inflation shocks which may result from continued conflict in the Middle East.”
