UK economy grows at twice the expected rate

The UK economy grew by 0.4% in May, twice the expected figure, fueled by ongoing expansion in the services sector and a rebound in housebuilding. The month-on-month increase followed zero growth in April, the Office for National Statistics reported on Thursday, and exceeded the 0.2% forecast for May. As a result, GBP rose to four-month highs against USD shortly after the announcement.

The robust growth in May indicates that the quarterly expansion might surpass the Bank of England's forecasts, potentially complicating its decision on whether to start cutting interest rates in August from their 16-year high of 5.25%. This economic data brings the UK's annual GDP growth to 1.4%, higher than the 1.2% economists had predicted.

Although the data was recorded under the previous Conservative government, it serves as a boost to Labour. Chancellor Rachel Reeves stated, "This week I have already taken the urgent action necessary to fix the foundations of our economy, to rebuild Britain, and to make every part of Britain better off. A decade of national renewal has begun, and we are just getting started."

Growth in May was propelled by the services sector, which expanded by 0.3%, marking the fastest three-month growth since December 2021 when COVID-19 restrictions were still in effect. Manufacturing production rose by 0.4% in May, while construction rebounded by 1.9% following a sharp contraction in April due to wet weather.

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