Pent-up demand for health and vacation services helps economy rebound in May
Britain’s economy posted a better-than-expected rebound in May, with demand for health and holiday services offsetting the impact of the cost of living on spending in shops, official figures showed.
The Office for National Statistics (ONS) said gross domestic product (GDP) rose 0.5% in May, rebounding from an upwardly revised decline of 0.2% in April, from a fall of 0 .3% in its initial estimate.
Experts expected the economy to remain stable in May.
But it’s thought May’s rebound could prove short-lived as fears grow over falling consumer spending as households tighten their belts amid soaring inflation, which has peaked by 9.1% in 40 years.
Newly appointed Chancellor Nadhim Zahawi has said that despite May’s better than expected figure he is not “complacent” about the economic challenges facing the UK.
He said: “I know people are worried so we continue to support families and economic growth.
“We are working alongside the Bank of England to tackle inflation and I am confident we can create a stronger economy for everyone across the UK.”
The ONS said the growth came after a rebound in the three main sectors of the economy – services, manufacturing and construction – with increased visits to GPs helping to counter the impact of the government cut of its Covid Test and Trace program.
The ONS also said growth in the all-important services sector had been boosted, with summer holidays back on the agenda, with output from the travel agency and tour operator industry having jumped 11%.
Darren Morgan, director of economic statistics at the ONS, said: “Health was the main driver, with many more people seeing GPs, despite the end of test and trace and vaccination schemes.
“Road carriers also had a busy month, while travel agencies held up well against pent-up demand for summer holidays.
“There was broad-based growth in manufacturing after several difficult months, while construction also performed well, with housing construction and office renovation fueling growth.”
The growth means production rose by 0.4% in the three months to May 2022, according to the ONS.
Data showed growth in consumer services fell 0.1% in May 2022, led by a 0.5% drop in retail as consumers curbed spending amid cost pressures .
Overall, services output rose another 0.4% in May, while manufacturing rose 1.4% and construction 1.5%, marking its seventh month of growth.
Ben Jones, chief economist at the CBI Group of Companies, warned of volatility in current GDP data, particularly due to the Queen’s Jubilee bank holidays.
He said: “In reality, CBI surveys and real-time data indicate subdued economic momentum.
“The priority of the next Prime Minister must be to revive the economy.”
Martin Beck of the EY Item Club said he still expects the economy to contract between April and June, but said he should avoid a technical recession as defined by two consecutive quarters of falling production.
“However, in many ways the economy will still feel in recession, with consumers facing a large and prolonged decline in real incomes, while unemployment is expected to rise,” he warned.