2024-07-11 07:31:24
The City of London skyline in London, England, on June 10, 2024. The City of London is a city, ceremonial county and local government area containing London’s main central business district, CBD. The City of London is widely referred to simply as the City and is also colloquially known as the “Square Mile”.
Mike Kemp | Photo | Getty Images
LONDON — Britain’s economy grew 0.4% in May, the Office for National Statistics reported on Thursday, sending the pound to a four-month high once morest the dollar.
Gross domestic product rose 0.2% on a monthly basis, above the forecast in a Reuters poll of economists.
The UK economy emerged from a shallow recession in the first quarter of this year but stagnated in April.
China’s dominant services sector continued to grow by 0.3% in May, while output in both manufacturing and construction sectors rebounded from losses, increasing by 0.2% and 1.9% respectively.
Data from the London Stock Exchange showed that as of 8:30 a.m. London time, the pound rose 0.14% once morest the dollar to $1.2863, the highest level for the pound since March 8, 2024.
As British Prime Minister Keir Starmer enters his first week in office, a full economic recovery will be welcomed by the newly elected Labour Party.
Goldman Sachs last week raised its forecasts for British economic growth following the center-left Labour Party won a landslide victory in the general election on a platform centered on boosting economic growth, housing and planning.
Analysts see the government as generally supportive of British assets, thanks to Labour’s majority in Parliament and its pro-business message.
Ashley Webb, UK economist at Capital Economics, highlighted in a report that, apart from weak growth in April, UK GDP has been trending upward in recent months, “supporting the view that the twin drags on economic activity from high interest rates and high inflation are beginning to fade.”
UK price growth has fallen from a 41-year high of 11.1% in October 2022 to the Bank of England’s 2% target in May this year. The performance has fueled expectations of an imminent rate cut by the Bank of England.
However, even as its ECB counterparts also began cutting rates, the BoE remained cautious at its June meeting, warning that key indicators of the persistence of UK inflation “remain elevated.” Markets were broadly similar regarding the prospect of a BoE rate cut at its August meeting.
Labour Party Agenda
Muniya Barua, deputy chief executive of industry campaign group BusinessLDN, said in emailed comments that it would now be up to the new government to drive the latest economic growth figures.
“With public finances stretched thin, ministers should follow the government’s recently announced package of pro-growth policies and prioritise high-impact, low-cost measures that, taken together, can help unlock much-needed private investment,” Barua said, citing reforms to apprenticeships and the removal of stamp duty on stock transactions.
New Finance Minister Rachel Reeves last week She said Labour would introduce mandatory housing construction targets, lift a ban on new onshore wind farms in England and reform planning rules. On Wednesday, she announced the launch of a 7.3 billion pound ($9.4 billion) national wealth fund aimed at attracting private sector investment in UK infrastructure projects.
Lindsay James, investment strategist at Quilter Investors, said in a note that the business community is currently awaiting Labor’s first fiscal statement, which is expected to be released as early as mid-September.
James said this “should provide greater clarity on tax and spending plans. This will allow businesses to plan ahead better, potentially reviving their appetite to invest.”
“However, this will take time to digest and we are unlikely to see any meaningful acceleration in GDP growth until we have a better understanding of the future,” she added.
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