Britain’s Economy Grew 0.8% in May, Slower than Expected


The British economy grew 0.8 percent in May as more pandemic restrictions were lifted, official data showed, but the pace of growth has slowed and economists warn that returning to prepandemic levels will be harder, especially if consumers react cautiously to rising coronavirus infections.

May was the fourth straight month of growth in Britain, the Office for National Statistics said on Friday, but the rate was nearly half of what economists were expecting. The monthly gross domestic product increased 2 percent in April and 2.4 percent in March.

The British economy was about 3 percent smaller in May than it was in February 2020, before the pandemic.

Other data published by the statistics agency this week that measures the economy in real time by examining retail foot traffic, restaurant reservations and credit card spending also showed signs of activity plateauing in June and early July.

The main propeller of economic growth in May was the hospitality sector as indoor dining reopened across the country. But the sector is still nearly 10 percent smaller than it was before the pandemic. The manufacturing sector was a drag on the economy after a global shortage of chips disrupted the industry, particularly in car production. And the construction sector contracted for the second-consecutive month.

“Growth is moderate outside the sectors being unlocked,” Rory MacQueen, an economist at the National Institute of Economic and Social Research, wrote in a note. It’s still unclear whether the government’s plans to lift all restrictions on July 19 will lead to “strong growth in the third quarter or — if cases of Covid-19 continue to rise — increased caution among consumers and even another national lockdown,” he added.

As coronavirus case numbers have risen, Britain’s National Health Service as warned hundreds of thousands of people through its track-and-trace app that they have come into contact with someone with the virus. There are concerns that millions of people could soon be asked to self-isolate.

That could explain why some of the economic data has leveled off, said James Smith, an economist at ING, adding that he expected the economy to return to its prepandemic size by the end of the year. “We’d still say the outlook beyond the summer looks reasonably good, assuming no significantly vaccine-evasive variants emerge in the near-term,” he wrote in a note.


Comments are closed.