The UK economy demonstrated unexpected resilience in May 2024, growing by 0.4% according to the Office for National Statistics (ONS), doubling the 0.2% increase economists had predicted. This growth marks a significant rebound from a flat April, which had been affected by poor weather conditions.The expansion was broad-based, with all main sectors of the economy contributing positively. The construction sector led the charge, growing at its fastest rate in almost a year with a 1.9% increase, driven by housebuilding and infrastructure projects. The services sector, which includes retail and professional services, grew by 0.3%, while industrial production rose by 0.2%.Liz McKeown, ONS Director of Economic Statistics, stated, ‘The economy grew strongly in May with all the main sectors seeing increases. Many retailers and wholesalers had a good month, recovering from a weak April’. This growth has pushed the three-month economic expansion to 0.9%, the strongest reading since January 2022.The new Labour government, led by Chancellor Rachel Reeves, has welcomed this economic boost. Reeves emphasized, ‘Delivering economic growth is our national mission, and we don’t have a minute to waste’. The government has announced measures to stimulate further growth, including reintroducing housebuilding targets, overhauling planning restrictions, and ending the onshore wind farm ban in England.However, economists caution against overoptimism based on a single month’s data. The stronger-than-expected growth could potentially reduce the likelihood of the Bank of England cutting interest rates, especially as inflation concerns persist. Additionally, households face challenges with rising costs, as water bills in England and Wales are set to increase by an average of £94 over the next five years.As the UK navigates its economic recovery, the coming months will be crucial in determining whether this growth can be sustained and translated into long-term economic stability.
Key points
- UK economy grew by 0.
- Growth was broad-based, with construction, services, and industrial production all expanding.
- New Labour government has announced measures to stimulate further growth.
- Economists warn against overoptimism, citing potential impacts on interest rates and inflation.
4% in May 2024, double the expected rate.
Contradictions👾While the economic growth is generally seen as positive, there are concerns about its impact on interest rates and inflation, potentially leading to conflicting policy decisions.
