UK economy defies fears by surging 0.5% in May

The British economy defied fears of an impending recession and rose by 0.5 percent in May.

Official figures showed that GDP is faring better than the 0.1 percent quoted by analysts.

There was a rebound in all three main sectors of the economy – services, manufacturing and construction.

The previous estimate for a 0.3 percent decline in April has also been revised down by 0.1 percentage point.

Chancellor Nadhim Zahawi said it was “great” that UK plc was back in positive territory.

However, the better-than-expected result will fuel expectations that the Bank of England will take tough action to curb rampant inflation – which is expected to hit 11 per cent by the end of the year.

Fear of plunging the economy into recession is dampening the bank’s interest rate movements.

Meanwhile, separate trade figures released showed that exports of goods to the EU hit £16.9 billion in May. That was £400m more than in May and the highest since records began in 1997.

However, the ONS said this was due to rising prices and, factoring in inflation, it was the highest since December 2020.

Imports from the EU rose much more sharply, by £1.4bn to £27.8bn on the month.

Overall, the trade deficit with the bloc was £11 billion in May.

In the three months to May, the deficit in both non-precious goods and services widened by £8.6 billion to £27.9 billion.

Mr Zahawi said: “It’s always great to see the economy grow, but I’m not complacent.

“I know people are concerned, so we continue to support families and economic growth.

“We are working with the Bank of England to curb inflation and I am confident we can create a stronger economy for everyone in the UK.”

Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said: “The economy rebounded in May with growth in all major sectors.

“Health was the biggest driver as many more people were seeing GPs despite testing and tracing and the cessation of immunization programmes.

“Road hauliers also had a busy month, while travel agents fared well with pent-up demand for summer holidays.

“After several difficult months, there was widespread growth across manufacturing, while construction also did well as residential construction and office renovations fueled growth.”

With inflation already at 9.1 per cent, fears are that consumer spending will collapse as households tighten their belts, which could plunge the UK into recession.

Data showed that consumer-facing services growth declined 0.1 percent in May 2022, driven by a 0.5 percent contraction in retail sales as consumers reined in spending amid cost pressures.

Overall, services output still grew 0.4 percent in May, while manufacturing grew 1.4 percent and construction 1.5 percent, marking the seventh month of growth.

Ben Jones, senior economist at the CBI Business Group, warned about the volatility of the current GDP data.

He said: “This is partly due to the impact of the centenary holiday and this noise will continue to obscure the true state of the economy for the next few months.

“Indeed, CBI surveys and real-time data point to subdued economic momentum.

“The next prime minister’s priority must be to get the economy growing again.”