UK GDP: Economy contracted 0.1% in May as Corona bank holiday impacted activity – Business | Business

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ONS: Factories and builders blame reduced production on Coronation

A number of manufacturing industries and construction companies named the additional holiday to mark the coronation of King Charles III. on Monday 8 May as the reason for the lower production during the month.

However, the ONS reports that other sectors of the economy have also benefited from the celebrations.

Today’s GDP report says:

On a positive note, we had comments suggesting that industries in the arts, entertainment and leisure sectors benefited from the additional bank holidays.

There were also comments on both increased and decreased production in the accommodation and catering sector.

Chancellor of the Exchequer, Jeremy Hunt, says that bringing down inflation will help the economy:

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“While an extra bank holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.

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“The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible.

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“Our plan will work, but we must stick to it.”

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That plan includes resisting pressure for public sector pay increases, which has led to the longest industrial action in the history of the NHS which starts today as junior doctors go on strike for five days.

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May’s GDP report shows that the UK economy was “floundering” even before the impact of recent interest rate rises are fully felt, says Suren Thiru, economics director at ICAEW (the Institute of Chartered Accountants in England and Wales).

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The extra bank holiday for the Coronation curbing output in May, points out Thiru, who warns that Rishi Sunak’s growth pledge is at risk.

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Thiru says:

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“While the economy may rebound in June, the significant squeeze on activity from high inflation, stealth tax hikes and rising interest rates means the Prime Minister may struggle to meet his pledge to get the economy growing.

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“These GDP figures are unlikely to prevent another rate rise in August. However, given the long time lag between rate rises and its effect on the real economy, tightening further risks damaging our growth prospects by overcorrecting for past errors.”

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A range of manufacturing industries and construction businesses cited the additional bank holiday for the Coronation of King Charles III, on Monday 8 May, as a reason for reduced output during the month.

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But, the ONS reports that other sectors of the economy benefited from the festivities.

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Today’s GDP report says:

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On the positive side, we had comments suggesting industries in the arts, entertainment and recreation sector benefitted from the extra bank holiday.

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There were also comments on both increased and reduced output received in the accommodation and food services sector.

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512.jpg?width=480&quality=85&auto=format&fit=max&s=5d099164404a85ae46cc7d0ceba471da”,”width”:480},{“src”:”https://i.guim.co.uk/img/media/6e51eaf294ad890ec9fc20a575d729d99ca956bb/0_5_512_393/master/512.jpg?width=480&quality=45&auto=format&fit=max&dpr=2&s=beb33ecf0eafc939d947c38f9cf5c527″,”width”:960}]}],”elementId”:”93557100-c0e6-4e60-960b-92facc78bb9b”}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1689228466000,”blockCreatedOnDisplay”:”02.07 EDT”,”blockLastUpdated”:1689228630000,”blockLastUpdatedDisplay”:”02.10 EDT”,”blockFirstPublished”:1689228630000,”blockFirstPublishedDisplay”:”02.10 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.10″,”title”:”UK GDP: The key charts”,”contributors”:[],”primaryDateLine”:”Thu 13 Jul 2023 02.33 EDT”,”secondaryDateLine”:”First published on Thu 13 Jul 2023 01.43 EDT”},{“id”:”64af916d8f08df284700312d”,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Newsflash: Britain’s economy shrank slightly in May, with GDP falling by 0.1% as the dominant services sector stagnated and factories contracted.

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The Office for National Statistics said that gross domestic product fell on the month, after growth of 0.2% in April.

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That’s slightly better than expected, as City economists had forecast a fall of 0.3% in May. They feared that the extra bank holiday for King Charles’s coronation hit activity, while the economy continued to be held back by the cost of living squeeze, and public sector strikes.

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But looking at the broader picture, GDP has shown no growth in the three months to May 2023.

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The ONS reports that production output fell by 0.6% in May, while the construction sector fell by 0.2%.

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The services sector showed no growth in May, while consumer-facing services fell by 0.2% in the month.

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More to follow…

“,”elementId”:”aa1a2e68-47b9-46bd-b75c-b69f3129cff3″}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1689227629000,”blockCreatedOnDisplay”:”01.53 EDT”,”blockLastUpdated”:1689229530000,”blockLastUpdatedDisplay”:”02.25 EDT”,”blockFirstPublished”:1689228174000,”blockFirstPublishedDisplay”:”02.02 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.02″,”title”:”UK GDP shrank by 0.1% in May”,”contributors”:[],”primaryDateLine”:”Thu 13 Jul 2023 02.33 EDT”,”secondaryDateLine”:”First published on Thu 13 Jul 2023 01.43 EDT”},{“id”:”64af0e9b8f08ce64897eb4d3″,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

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This morning we learn how the UK economy fared in May, and whether the extra bank holiday for King Charles’s coronation hit growth.

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The Office for National Statistics will release May’s GDP report at 7am. Economists predict the economy contracted during the month, with activity held back by three bank holidays.

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That would continue the UK’s volatile 2023 – the economy grew by 0.2% in April, after a fall of 0.3% in March.

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Sanjay Raja, Deutsche Bank’s chief UK economist, predicts that GDP shrank by 0.3% in May.

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He explains:

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\n

Why the fall? In short, the extra Bank Holiday as a result of the King’s Coronation.

\n

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Deutsche Bank still expect the UK economy will contract by 0.1% in the April-June quarter, putting it halfway into recession.

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And with interest rates set to keep rising, the risk that UK GDP contracts next year will “rise materially”.

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Raja adds:

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\n

A hard landing may be unavoidable.

\n

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Also coming up today

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The UK’s independent fiscal watchdog, the Office for Budget Responsibility, is due to publish a new report on Fiscal risks and sustainability.

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The OBR is expected to warn that rising interest rates are hurting the public finances, scuppering any lingering prospect of pre-election tax cuts.

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The report will also examine the impact of higher gas prices, and the role of sickness in explaining the rise in people dropping out of the workforce.

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And to further dampen the mood, the OBR will also run through some of the “wider range of risks to the UK economy and public finances”.

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The agenda

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  • 7am BST: UK GDP report for May

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  • 9am BST: IEA’s monthly oil market report

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  • 10am BST: OBR publishes fiscal risks and sustainability report

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  • 1.30pm BST: US PPI index of producer price inflation for June

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  • 1.30pm BST: US weekly jobless claims report

    • \n

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key events

Hunt: Additional holidays weighed on growth in May

Chancellor of the Exchequer jeremy huntsays lowering inflation will help the economy:

“While an additional holiday in May weighed on growth, high inflation remains a drag on economic growth.

“The best way to restart growth and ease the pressure on families is to bring inflation down as soon as possible.

“Our plan will work, but we have to stick to it.”

Part of that plan is to resist pressure for public sector wage increases, which has led to the longest-running industrial action in NHS history, which begins today when young doctors go on strike for five days.

ICAEW: Sluggish economy jeopardizes Prime Minister’s promise of growth

May’s GDP report shows that the UK economy is “tumbling” before the full impact of recent interest rate hikes is felt, it says Surah ThiruDirector of Economics ICAEW (the Institute of Chartered Accountants in England and Wales).

The additional public holiday for the Corona crisis is said to reduce production in May Thiruwho warns that Rishi Sunak’s promise of growth is in jeopardy.

Thiru says:

“While the economy could recover in June, the significant pressure on economic activity from high inflation, stealth tax hikes and rising interest rates means the Prime Minister could struggle to deliver on his promise to stimulate the economy.

“These GDP numbers are unlikely to prevent another rate hike in August. However, given the long lag between rate hikes and their impact on the real economy, further tightening risks damaging our growth prospects by over-correcting past mistakes.”

Food and beverage service activity was the largest contributor to the decline in consumer-facing services in May.

The sector’s GDP fell 1.1% in May after growing 2.4% in April.

Buying and selling and leasing and operating owned and leased real estate were the next largest contributors, down 0.7% after a similar decline in April.

There was also anecdotal evidence that labor disputes hit the economy in May 2023, according to today’s GDP report.

These include strikes in the public sector and on the rail network.

ONS says:

Industrial action broke out in May 2023 in the health sector (nurses), the rail network, the education sector and the public sector. This should be taken into account when interpreting monthly movements in these industries.

We also had some anecdotal evidence that the rail network industrial action was having a negative impact on footfall in the food and beverage service.

A closer look at the report reveals that human health activity actually grew 1.8% in May after contracting in March and April.

ONS says:

There were no strikes by young doctors in May 2023, compared with four days of strikes in April 2023. There were two days of strikes by nurses in England in May, compared with none in April.

ONS: Factories and builders blame reduced production on Coronation

A number of manufacturing industries and construction companies named the additional holiday to mark the coronation of King Charles III. on Monday 8 May as the reason for the lower production during the month.

However, the ONS reports that other sectors of the economy have also benefited from the celebrations.

Today’s GDP report says:

On a positive note, we had comments suggesting that industries in the arts, entertainment and leisure sectors benefited from the additional bank holidays.

There were also comments on both increased and decreased production in the accommodation and catering sector.

UK GDP: Key charts

A chart showing UK GDP in June
Photo: ONS
A chart showing UK GDP up to June 2023
Photo: ONS

The fall in May means the UK’s monthly GDP is now estimated to be just 0.2% above the pre-coronavirus level set in February 2020.

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

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UK GDP contracted 0.1% in May

News Brief: The UK economy contracted slightly in May, with GDP down 0.1% as the dominant service sector stagnated and factories shrank.

The Office for National Statistics said gross domestic product fell month-on-month after growing 0.2% in April.

That’s slightly better than expected, as the city’s economists had forecast a 0.3% decline in May. They feared that the extra bank holiday to mark King Charles’ coronation would hurt economic activity, while the economy continued to be held back by cost of living shortages and public sector strikes.

However, looking at the bigger picture, GDP has not shown any growth in the three months ended May 2023.

The ONS reports that manufacturing output fell 0.6% in May while the construction sector fell 0.2%.

The services sector showed no growth in May, while consumer-facing services fell 0.2% over the month.

Continue…

The UK property market showed signs of slowing down in June, an industry survey showed this morning.

According to the Royal Institution of Chartered Surveyors (Rics), inquiries for new homebuyers fell to an eight-month low in June as buyers were deterred by rising mortgage rates and fears of an economic slowdown.

Property appraisers expect activity to remain subdued as higher borrowing costs weigh on demand from new buyers. More here.

Public sector strikes also weighed on the economy in May as workers pushed for wage increases to protect against inflation.

Michael Hewson from CMC markets explained:

Monthly GDP figures for May are expected to fall by -0.3% on the back of numerous bank holidays throughout the month as well as widespread public sector strike action, with the services index showing a sharp fall of 0, 3% recorded in April to -0.2%.

The poor performance in May should have a significant negative impact on GDP in the second quarter, although we should expect a recovery from that in June.

Introduction: UK May GDP report in focus

Good morning and welcome to our ongoing coverage of the economy, financial markets and the global economy.

This morning we find out how the UK economy fared in May and whether the extra bank holiday to mark King Charles’ coronation hurt growth.

The Office for National Statistics will release the May GDP report at 7am. Economists expect the economy to contract over the month, with three public holidays holding back activity.

That would continue a volatile 2023 in the UK – the economy grew 0.2% in April after a 0.3% contraction in March.

Sanjay Raja, The Deutsche Bank Britain’s chief economist forecasts GDP contracted 0.3% in May.

He explains:

Why the fall? In short, the extra holiday resulting from the king’s coronation.

German Bank They still expect the UK economy to contract by 0.1% in the April-June quarter, putting it halfway into recession.

And with interest rates expected to continue rising, the risk of UK GDP contracting next year will “rise significantly”.

Raja adds:

A hard landing might be inevitable.

Also pending today

The UK’s independent financial regulator Office for budget Responsibilityis expected to publish a new report on budgetary risks and sustainability.

The OBR is expected to warn that rising interest rates will weigh on public finances and wipe out any remaining prospect of tax cuts ahead of the election.

The report also examines the impact of higher fuel prices and the role of disease in explaining the increase in early leavers.

And to further dampen sentiment, the OBR will also review some of the “broader risks to the UK economy and public finances”.

The agenda

  • 7am BST: UK GDP report for May

  • 9am BST: IEA Monthly Oil Market Report

  • 10am BST: OBR releases financial risk and sustainability report

  • 1.30pm BST US PPI Index Producer Price Inflation for June

  • 1.30pm BST: Weekly report on US jobless claims

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