UK economy bounces back in May – has this staved off a recession?
According to the latest figures released by the Office for National Statistics (ONS), the UK economy grew by 0.5% in May, after shrinking in April and March.
The ONS said that the economy received a boost due to growth in the construction industry and a large rise in GP appointments. However, many businesses reported that an increase in fuel and electricity costs had forced them to raise prices for customers. Price increases for metals and some staple foods were also cited by the ONS.
Darren Morgan, Director of Economic Statistics at the ONS, was quoted in the BBC saying that the UK economy had “rebounded” with growth across the main sectors, including manufacturing, services and construction. “Health was the biggest driver with many more peoples seeing GPs, despite test and trace and the vaccination programmes winding down,” he said.
Whilst economic growth will be welcomed by many, others will feel it is not enough, particularly during a time when inflation is at a 40-year high of 9%, which has already curtailed consumer spending.
With the Bank of England predicting inflation to rise even higher by the end of the year and for the economy to contract by almost one percent between October and December, today’s statistics will do little to quell fears of an incoming recession too.
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, comments on today’s ONS figures: “UK GDP grew by 0.5% in May 2022, after a decline of 0.2% in April, after fears the data set would show no growth. The services sector was to thank for the majority of the increase, with a particular emphasis on human health and social work activities.
“It appears a surge in GP appointments has aided the UK economy this time around, helping to prop up health service activity, despite a huge drop in test and trace vaccinations. Elsewhere in Services, the repair of motor vehicles and motorcycles fell by 0.8%.
“There was proof that the UK consumer base is on shaky ground, with consumer-facing services like retail trade, food and beverage, travel and transport, and entertainment and recreation seeing output fall 0.1%. Consumer-facing services were 4.7% below pre-Covid levels.
“While it’s positive to see a small nudge upwards in overall GDP, these figures are hardly shooting the lights out. It will take something strong to fully reverse fears the UK’s heading towards a recession in the coming year. Frankly, until there is a clear path out from political turmoil, the energy crisis, cost-of-living squeeze, and the UK’s far-reaching productivity problems, it’s hard to see where the economy will find its take-off point.
“The FTSE 100 is expected to remain sensitive to news coming from the US, with the latest inflation data due. It’s not widely expected this will be a number to celebrate, and jitters around the federal reserve’s willingness to stoke the fires of interest rate hikes will be far-reaching. Further soaring inflation gives policymakers the power to do just that.
“The latest twist in the Elon Musk Twitter saga is here. Twitter is suing billionaire Musk to try to force him to buy the social media firm. The world is gripped by news of the world’s richest man being hauled into such public legal proceedings. The drama comes after Mr Musk announced he was walking away from his proposed $44bn (£37bn) takeover of Twitter on Friday. The eventual outcome of such a case is anyone’s guess, with the story so far not following any rules. One thing’s for sure though – Elon Musk’s immense resources means he will have the ability to throw a lot at fighting the case.”