UK economy returns to growth but slowdown fears persist

By BBC News,

The UK economy returned to growth in May after shrinking in April, but the news failed to allay fears of a future slowdown.

The economy grew 0.3% from the month before, after declining 0.4% in April, according to the Office for National Statistics (ONS).

Growth for the three months to May was 0.3%, with all sectors showing growth.

But economists say that June’s growth figures will have to be strong to avoid contraction in the second quarter.

A partial recovery in car production, which had fallen sharply in April, was the main reason for the economy’s upturn in May, said Rob Kent-Smith, head of GDP at the ONS.

Factory shutdowns designed to cope with disruption from a March Brexit had slashed UK car production in April by nearly half.
However, despite this rebound, the levels of output in the car industry are below those seen in the months leading up to April 2019, the ONS said.

“GDP grew moderately in the latest three months, with IT, communications and retail showing strength. Despite this, there has been a longer-term slowdown in the often-dominant services sector since summer 2018,” Mr Kent-Smith added.

In May, growth in services was flat, following growth of 0.1% in April.
Ben Brettell, senior economist at Hargreaves Lansdown, said the latest figures suggested the economy grew overall in the second quarter, although probably at a much slower rate than the 0.5% recorded in the January-to-March period.

Those second-quarter figures, covering April to June, are due to be released on 9 August.

“Storm clouds look to be gathering over the UK economy, as consumers and business remain hamstrung by Brexit uncertainty,” he added.

Last month, the Bank of England said it expected economic growth to be flat in the second quarter of the year.