The UK economy grew 0.5% in May after two consecutive months of contraction, according to figures released by the Office of National Statistics (ONS).
The ONS confirmed GDP was estimated to currently be 1.7% above its pre-Covid-19 levels.
“After all the doom and gloom about the state of the British economy May’s growth figures might have some people wondering what all the fuss has been about,” said AJ Bell financial analyst Danni Hewson.
“A slight uptick had been anticipated, but at 0.5% the pace of growth has caught many by surprise.”
“Put simply, people have been living their lives, playing catch up, and doing all that housekeeping they hadn’t yet been able to get round to.”
The growth was attributed to a 0.4% climb in services output linked to human health and social activities, which rose by 2.1% on the back of a significant increase in GP appointments and served to offset the decline of track and trace.
“Anyone who has tried to book an appointment with their doctor over the last few weeks won’t be surprised to learn that GP visits have played a big part in boosting May’s numbers, something which has offset the drag from a real tapering off of test and trace operations and booster vaccine programmes,” said Hewson.
Meanwhile, output in consumer-facing services declined by 0.1% over May due to a 0.5% fall in retail trade.
However, non-consumer facing services grew by 0.5% after a drop of 0.8% in April.
The ONS reported a 0.9% rise in production, boosted by a 1.4% growth in manufacturing and a 0.3% increase in electricity, gas, steam and air conditioning supply.
“Manufacturers have really turbo charged operations despite all the price hikes they’ve experienced,” said Hewson.
“It suggests that supply blockages may finally have worked their way through the system and that many have been able to pass on extra costs to their customers.”
The figures also mentioned a 1.5% climb in construction over the month, after a 0.3% uptick in April, marking the seventh consecutive month of growth for the sector.
“Construction has had another great month, bolstered by housebuilding in a market that’s only slightly coming off the boil, and by the changing requirements of business that need to reconfigure workspaces after Covid restrictions or embrace new ways of working,” said Hewson.
Cautious Optimism
The figures painted an optimistic picture of the UK economy over May after the dire news of the previous two months. However, experts stressed the importance of cautious optimism despite the GDP growth.
The risk of recession alarms remain heavy on the horizon, and customers have been spending less on retail and non-essential expenses as the cost of living crisis bites, with inflation currently at 9.1% and on-track to hit 11% by October this year.
“These figures represent just one month – albeit a crucial one because it means the quarter as a whole doesn’t meet the criteria for negative growth – but one month can never tell the whole story,” said Hewson.
“There are headwinds that are impossible to ignore. Retailers, hospitality venues, gyms, museums and children’s play centres are all feeling the weight of high inflation.”
“Households are strategically cutting back on their spending, which is a particular blow to the consumer services which still haven’t been able to get anywhere near their pre-pandemic glory days.”
