ECONOMY
Economic recovery loses pace in May

The UK’s economic recovery slowed substantially in May, despite the continued reopening of the economy.

Gross domestic product increased just 0.8pc over the month, falling well short of the 1.7pc expected by economists. It marked a significant slowdown compared to April’s 2.3pc gain.

GDP is still 3.1pc below its pre-pandemic level in February 2020, according to the Office for National Statistics.

Output in the manufacturing and services sectors is 3pc and 3.4pc below peak respectively, with only construction having fully recovered from the pandemic.

Pedestrians, some wearing face covering dues to Covid-19, walk past shops in Hounslow, west London on June 1, 2021. (Photo by JUSTIN TALLIS/AFP via Getty Images)© Getty Pedestrians, some wearing face covering dues to Covid-19, walk past shops in Hounslow, west London on June 1, 2021. (Photo by JUSTIN TALLIS/AFP via Getty Images)

Accommodation and food services activity soared 37.1pc during the month as customers were once again allowed to drink and eat inside, but continued social distancing restrictions as well as fears of new Covid-19 variants are likely to have put a dampener on the number of diners.

Despite the disappointing reading, the rise continues a run of economic growth, with a smaller-than-expected drop at the start of the year followed by a streak of healthy expansion through the spring as restrictions eased.

The data captures the restart of indoor hospitality on May 17, as well as the tail end of the boost from non-essential retailers and outdoor hospitality reopening in April.

A hand sanitizer station is placed at the entrance of Moth Club in Hackney, in London, Saturday, May 29, 2021. (AP Photo/Alberto Pezzali)© AP A hand sanitizer station is placed at the entrance of Moth Club in Hackney, in London, Saturday, May 29, 2021. (AP Photo/Alberto Pezzali)

Economists at bank Investec said May would be the last month of the “low-hanging fruit”, in which output is given a boost by the substantial easing of restrictions.

There are other signs that the recovery is slowing. Analysis of data from the ONS’s business impact surveys by consultancy Pantheon Macroeconomics found the implied rise in turnover for British companies during May was just 0.8pc – the weakest level since January.

Consumer spending dipped later in the month after an early peak, according to credit and debit card data from the Bank of England. But consumers borrowed more than they paid back for the first time since August 2020.

Trade data for May, which had been due for publication this morning, has been delayed until 12pm and will be limited to the headline statistics. Full information will be released next week, with the ONS blaming “processing difficulties” for the delay.

Source: Telegraph.co.uk

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