2024-07-11 10:13:17
go through Nick Edsor, Business reporter
Getty ImagesBritain’s economy grew faster than expected in May, helped by strength in retailers and the construction sector.
The economy grew 0.4%, rebounding from zero growth in April when wet weather kept shoppers away and slowed construction projects.
The construction industry grew at its fastest pace in nearly a year in May, with homebuilding and infrastructure projects driving the sector’s growth. The Office for National Statistics (ONS) said.
Analysts said the new data, combined with recent comments from Bank of England policymakers, meant a decision on whether to cut interest rates next month was on a “perilous edge”.
The May growth figure was double what had been expected. Liz McKeown of the ONS said many retailers and wholesalers had “had a good month, recovering from a weak April”.
The services sector, which dominates the UK economy and includes businesses such as shops, pubs and restaurants, grew 0.3% in May, while construction rose 1.9%.
Economists warn once morest putting too much weight on changes in economic activity within a month because they can be affected by factors such as weather.
In the three months to May 2024, the economy grew by 0.9% compared with the previous three months, which the ONS said was the fastest pace of growth in more than two years.
Analysts said the unexpectedly strong growth data might reduce the chances that the Bank of England will cut interest rates from a 16-year high of 5.25% when it meets on Aug. 1.
The central bank raises interest rates to slow inflation (the rate at which prices rise). However, the latest inflation data showed that interest rates have fallen back to the central bank’s 2% target.
Still, two members of the central bank’s Monetary Policy Committee (MPC), which decides the level of interest rates, said this week they remained concerned regarding persistent inflationary pressures.
Strong economic growth boosts demand for goods and people, which in turn pushes up prices and wages. The latest inflation and wage growth data will be released next week.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The economy is growing slightly faster than expected and this may make Bank of England policymakers more cautious regarding voting for a rate cut.”
“The likelihood of a summer rate cut is fading and the outcome of the August 1 vote is expected to be difficult to predict.”
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “The UK economy is firmly on its way out of last year’s small recession.
He added: “Rate setters appear eager to ease policy and indicated in the minutes of their June meeting that they are not concerned regarding stronger-than-expected economic growth.”
“Even so, the latest growth surprise still supports our judgment that the MPC will wait until September before cutting Bank Rate.”
‘People want to get out and regarding once more’
Carrie-Anne Moore, who runs the alternative shop Broken Bonds in Birmingham’s Digbeth covered market, said business was booming.
“I started out small but in the last six months I’ve grown from a small unit to a large unit and even a second unit, so for me that’s been pretty good,” she said.
As well as her shop in Digbeth, Ms Moore sells at markets and tattoo conventions.
“I think now people want to get out and regarding once more, they don’t want to shop online,” Ms Moore added.
“They want a more human shopping experience, not just that big faceless company.”
However, for Mark Preston, who runs Ideal Skateboard in Digbeth, things haven’t been so smooth.
“It’s been a really tough spring … with the bad weather, no one’s really been out buying anything,” he said.
“Skateboarding is an outdoor sport, so when it rains people aren’t out playing. So if they’re not playing, they’re not going to buy more products.”
The question of how to boost UK economic growth was one of the main battlegrounds in the recent general election.
Responding to the latest growth figures, Chancellor Rachel Reeves said economic growth was the government’s “national mission” and “that is why this week I have taken the necessary urgent action to strengthen the foundations of our economy”.
Ms Reeves said on Monday Housing construction targets to be reintroducedplanning restrictions will be overhauled and the effective ban on onshore wind farms in England will end.
a new one National Wealth Fund It was also announced that it would attract investments in infrastructure and green industries.
Shadow first secretary to the Treasury Laura Trott said the latest economic figures “show that the measures we have taken during our time in office have strengthened the economy”.
She added: “These figures also prove that Labour is inheriting an economy at a turning point following many difficult decisions by the government.”
1720806229
#economic #growth #faster #expected