Unpredictable growth in the UK economy in May.
May saw faster-than-expected growth in the UK economy, with the retail and construction sectors playing key roles.
Following a month of flat growth due to rain that discouraged consumers and halted construction. The economy picked up steam in May, expanding by 0.4%.
According to the Office for National Statistics (ONS), the construction industry saw its strongest growth rate in over a year in May. Driven by house building and infrastructure projects.
Analysts say decision to lower rates next month is on a due to recent figures and Bank of England comments.
The growth figure for May was twice the predicted amount. Wholesalers and retailers “had a good month, with both bouncing back from a weak April,” said ONS’s Liz McKeown.
In May, the construction industry increased by 1.9%, while the services sector, which includes businesses like stores, pubs, and restaurants and makes up the bulk of the UK economy. Increased by 1.9%.
Changes in economic activity over the course of a month are susceptible to random variables like weather, so economists advise against putting too much stock in them.
Economic growth in the three months ending in May 2024 was 0.9% year-on-year, the fastest rate in over two years, according to the Office for National Statistics.
If the unexpectedly strong GDP numbers are any indicator, analysts believe the Bank of England may not decrease interest rates.
The Bank raised interest rates to curb inflation, or the rate at which prices are increasing. But new inflation data indicated that the rate had dropped back down to where the Bank had set it—2%.
However, two Bank Monetary Policy Committee (MPC) members expressed concern over inflationary pressures this week.
Price and salary increases are a natural consequence of an expanding economy, which drives up demand for products and services. Next week, the most recent data on inflation and pay increases will be released.
“This snapshot of an economy growing a bit faster than forecast, could make Bank of England policymakers that bit more reticent about voting for an interest rate cut,” said Susannah Streeter of Hargreaves Lansdown, who is in charge of economics and markets.
“The possibility of a summer rate cut is fading, with a vote on 1 August expected to be on a knife-edge.”
The UK economy is finally recovering from last year’s small recession, according to Pantheon Macroeconomics chief UK economist Rob Wood.The minutes of the June meeting show that the rate-setters expressed a lack of concern over stronger-than-expected growth, and it appears like they are eager to loosen policy.
“Even so, this latest upside growth surprise supports our call that the MPC will wait until September to reduce Bank Rate.”
“People are eager to go out and about once more.”
In Birmingham’s Digbeth indoor market, alternative retailer Broken Bonds is run by Carrie-Anne Moore, who reports a thriving company.
“I started quite small and over the last six months it has grown quite substantially from a small unit to a big unit to a second spot so for me it’s been pretty good,” according to her.
In addition to her Digbeth studio, Ms. Moore also sells at tattoo conventions and marketplaces.
“It seems like people are really interested in getting out and about again, rather than shopping online,” Ms. Moore chimed in.
“They prefer dealing with actual people rather than that impersonal corporation when they shop.”
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