Yahoo Finance UK economy shrinks by 0.1% in May amid Coronation holiday
Economy shrinks as Coronation hits growth
The threat of a recession this year continues to loom over the UK economy as Britain’s GDP shrank slightly in May.
Figures from the Office for National Statistics (ONS) showed negative growth of 0.1% during the month. The UK’s economy has shown no growth in the three months to May 2023.
The extra bank holiday for the King’s coronation meant a decline in GDP was widely expected.
Read more: UK households to be £2,300 poorer as interest rate rises extend cost of living crisis
The ONS reports that production output fell by 0.6% in May, while the construction sector fell by 0.2%.
The services sector showed no growth in May, while consumer-facing services fell by 0.2% in the month.
GDP fell 0.1% in May 2023.
▪️ Services were flat (0.0%)
▪️ Production fell 0.6%
▪️ Construction fell 0.2%
➡️ https://t.co/Z94htJo1G0 pic.twitter.com/oeYBJNy5id— Office for National Statistics (ONS) (@ONS) July 13, 2023
May’s contraction means that monthly UK GDP is now estimated to be just 0.2% above its pre-coronavirus levels set in February 2020.
Chancellor Jeremy Hunt said: “While an extra Bank Holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.
"The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it.”
There are concerns about the risk of recession in Britain, as record increases in wages put pressure on the Bank of England to increase interest rates higher for longer.
Premier Miton’s chief investment officer Neil Birrell said: " As expected, the UK economy shrank in May, but not as much as expected.Admittedly, we are a month on from that now and the economy could be weaker still, but this would not have been the picture the Bank of England wanted to see.
"With inflation still rife, this keeps the pressure firmly on the Bank to keep raising interest rates, putting even more pressure on the consumer in particular."
Read more: Interest rates push up mortgage costs for more than 4 million households
Darren Morgan, director for economic statistics at the ONS, said: "GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal.
"Meanwhile, despite the Coronation bank holiday, pubs and bars saw sales fall after a strong April. Employment agencies also saw another poor month.
"However, services were flat overall with health recovering, with less impact from strikes than in the previous month, and IT also had a strong month.
"Across the last three months as a whole the economy showed no growth."
Our world-leading Arts, Entertainment & Recreation was the 2nd biggest contributor to keeping UK GDP from falling further in May.https://t.co/eBCezMfd9s pic.twitter.com/DamS4WKfFK
— Nicholas Beale (@Starcourse) July 13, 2023
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