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United Kingdom GDP May 2022

United Kingdom: Economic activity bounces back in May

GDP increased 0.5% month-on-month in seasonally-adjusted terms in May (April: -0.2% mom), beating market expectations of a flat reading. As a result, the economy is now 1.7% above its pre-pandemic level. Looking at the details of the release, May’s rebound was broad-based, with the services, manufacturing and construction sub-sectors all accelerating. This more than offset a sharper contraction in mining and a deterioration in the hospitality subsector.

On a rolling quarterly basis, GDP rose 0.4% in March–May, which was better than February–April’s 0.3% expansion.

On the latest reading, Berenberg’s Kallum Pickering said:

“While the upside surprise is good news, and suggests that the recession did not begin as soon as we had heard feared, it does little to dispel worries about the outlook. […] the dual effect of external supply shocks – especially in energy markets – and ever-tighter monetary policy from the BoE to tackle the worsening inflation problem look likely to tip the UK into a modest recession over the coming quarters.”

Analysts at Goldman Sachs were more upbeat:

“Folding in both the back revisions and the surprising jump in activity in May boosts our estimate of Q2 GDP growth from -0.7% to +0.3%. We have also assumed that some of the positive momentum will continue into the coming months, which leads us to expect Q3 GDP to increase by +0.4% (vs +0.1% previously). Given we no longer estimate Q2 growth to be negative, we are lowering our recession probability for the year ahead to 35%.”

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