United Kingdom: Economic growth eases in May
GDP rose 0.8% month-on-month in seasonally-adjusted terms in May (April: +2.0% mom), notably below market expectations. While industrial production bounced back as adverse weather boosted energy output, momentum in the services sector slowed despite the further loosening of restrictions on the hospitality sector in the month. Moreover, a shortage of microchips hit auto manufacturing.
On a rolling quarterly basis, GDP increased 3.6% in March–May, which was notably better than February–April’s 1.5% expansion and marking the best result since the three months up to November 2020.
The economy should have still notched strong growth over Q2 as a whole amid the rapid domestic vaccine rollout, with the delay of the last phase of lockdown easing until late-July unlikely to have had a major impact. Growth rates will likely normalize in the second half of the year.
On the reading and outlook, analysts at Berenberg said:
“UK real GDP increased in May by slightly less than we had anticipated […]. Despite the small disappointment, underlying momentum remains robust. […] Following the publication of the May GDP data, we now estimate that UK real GDP increased by 4.8% qoq in Q2, slightly below our previous estimate of 5.0%. […] We continue to expect the UK to reach its pre-pandemic level of output in Q1 2022.”