The UK economy started its journey on the long road to recovery in May as lockdown restrictions were eased towards the end of the month.
The latest monthly estimate of GDP shows the economy grew by 1.8%, compared to a contraction of 20.3% in April.
The latest growth estimate did disappoint economists, being lower than the consensus estimate of 5.5%, but the miss highlights the difficulty in forecasting growth during this period.
When looking at the three months to May, and comparing it to the same three months a year earlier, economic activity is down by 18.6% in real terms, highlighting the gravity of the situation.
Looking at the main sectors of the economy, manufacturing led the way with a jump of 8.4%, while the construction sector grew by 8.2%. However, the services sector, the largest of the economy, only managed 0.9% growth. This is understandable as many non-essential services remained closed during the period.
Within the services sub-sectors, ‘wholesale and retail etc.’ saw the best improvement, up 13% over the month; however, a number of sub-sectors contracted again in May, including ‘information and communication’ and ‘real estate activities’.
The bulk of the fiscal stimulus announced in the Chancellor’s mini-budget focused on helping companies bring back their workers from furlough. Yet, the ‘accommodation and food services’ sector probably received the most in aid, with the reduction in VAT and “eat-out” incentives. This could be essential to help the troubled sector as the latest figures show activity is down 92% since February.
Looking ahead, next month’s GDP figures are very likely to show an acceleration in growth. More retailers and offices returned to work in June, though most personal services providers, along with public gatherings in restaurants and bars, did not return until July.