Britain’s economy grew more quickly than expected in May, providing some momentum for the new government of Prime Minister Keir Starmer but adding to doubts about whether the Bank of England (BoE) will cut interest rates next month.
Economic output increased by 0.4 per cent in May, after zero growth in April, the Office for National Statistics said. Economists had pointed to a 0.2pc monthly increase.
The strength of the upturn could dissuade the BoE from beginning to cut interest rates as soon as August 1, its next scheduled monetary policy announcement date. Three policymakers this week emphasised the strength of domestic price pressures.
May saw a broad-based increase in economic output, with the services, manufacturing and construction industries all growing and the latter up by 1.9pc on the month, driven by house-building.
The figures represented an early boost for the new Labour administration, which has set itself the aim of achieving the fastest growth among the Group of Seven advanced economies on a sustained basis.
Britain’s economy appears to have snapped out of its low-growth rut, at least for now. Output has grown by 1.5pc since the turn of the year, marking its best five months since early 2017, excluding the rebound from the Covid-19 pandemic.
Goldman Sachs yesterday nudged up its growth forecast for 2024 to 1.2pc from 1.1pc.
Still, the longer-run picture remains weak, with the economy only 2.7pc larger than its pre-pandemic level of late 2019.
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