UK economy grows 0.5% in May despite cost of living crisis – Business Live | Company

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UK decent #GDP figures for May (in line with the PMI message)… 👍

Overall growth of 0.5% helped by more GP appointments – but it’s still a wellbeing-enhancing activity.

Other services hold up well #inflation crisis, and rising production and construction. pic.twitter.com/ETnbU9QZY1

— Julian Jessop 🇬🇧 🇺🇦 (@julianHjessop) July 13, 2022

The production of services increased by 0.4% in May, with human health and social work activities increasing by 2.1%. There was a “sharp increase in GP appointments” in May, which offset the reduction in NHS test and trace and Covid-19 vaccination programmes, the ONS said.

Only in the UK would a jump in GP appointments trigger an upside surprise in GDP data during a cost of living crisis https://t.co/ iCl0woSfwe

—Anthony Barton (@ABartonMacro) July 13, 2022

The new Chancellor of the Exchequer, Nadhim Zahawi, was quick to answer the numbers.

It’s always great to see the economy grow, but I’m not complacent. I know people are worried, so we continue to support families and economic growth.

We are working alongside the Bank of England to tackle inflation and I am confident we can create a stronger economy for everyone across the UK.

UK economy grows 0.5% in May

The UK economy surprised us with growth of 0.5% in May, following a decline of 0.2% in April (revised after a decline of 0.3%). The growth was fueled by a boom in holiday bookings and a surge in GP appointments.

And in the three months to May, GDP rose 0.4%, according to figures from the Office for National Statistics. Economists had expected zero growth in May alone and the three months leading up to May, amid the cost of living crisis.

Overnight news: Twitter sued Elon Musk on Tuesday to force him to complete its $44 billion takeover of the social media giant after announcing on Friday it would withdraw its offer, writes our West Coast tech reporter, Kari Paul.

“Musk’s exit strategy is a model of hypocrisy,” the lawsuit said, accusing the billionaire of making “bad faith” arguments against Twitter and carrying out “public and deceptive attacks” on the company. ‘company.

The lawsuit has kicked off what could be a long legal saga over the failed merger. The Tesla CEO and the world’s richest man had reached a deal to buy Twitter on April 25, offering to buy all of the company’s shares for $54.20 each, but he has started backtracking on the allegations spam accounts on the platform.

The UK’s failure to take inequality and low growth seriously over the past 15 years has left the average UK household £8,800 poorer than their equivalent in five peer countriesresearch has found, writes our economics editor Larry Elliott.

A ‘toxic combination’ of low productivity and failure to narrow the gap between rich and poor has led to a widening prosperity gap with France, Germany, Australia, Canada and the Netherlands, report says of the Resolution Foundation.

The think tank said that if the UK matched the average income and inequality levels of these countries, the incomes of typical households in Britain would be a third higher and those of the poorest households two fifths higher. students.

Introduction: UK GDP report to be released amid cost of living crisis

Hello and welcome to our ongoing coverage of business, the global economy and financial markets.

We will have a fresh health check on the UK economy this morning when the May GDP figures are released.

The official data, due at 7am BST, comes as Britain could rush into recession as households and businesses grapple with a cost of living crisis.

Analysts expect the UK economy to come to a halt in the three months to May, after growing 0.2% in the previous three months. GDP in May alone is also not expected to show any change, after falling 0.3% in April.

We also get the UK trade and industrial production figures at the same time, as well as the final estimate of German inflation in June (forecast: 7.6%), followed a little later by the final estimates of the French and Spanish inflation.

Michael Hewson, Chief Market Economist at CMC Markets UK, said:

The most recent GDP figures for April showed the UK economy contracted by 0.3%, a much bigger drop than expected. On the face of it the numbers were very disappointing, but the fall was largely due to the end of the NHS test and trace program as the free Covid testing scheme came to an end. Given that this is a one-time effect and will not repeat itself, the actual numbers, while mediocre, were not as bad as they appear, despite the challenging macro backdrop.

As we look at today’s May numbers, the outlook is not expected to improve significantly, although we do see some modest improvement. Fuel prices are expected to rise further with daily reports of record highs for diesel as well as gasoline as it becomes more and more expensive to fill up. At some point, this will lead to demand destruction as consumers prioritize basic spending.

Philip Shaw, Chief Economist at Investec, said:

It is likely that the rising cost of living will continue to impact the UK economy, which is unlikely to be offset by a potential rebound in the manufacturing sector after a weak April. We expect UK GDP to contract by 0.2% in May compared to April.

What will likely be the most watched release is the US CPI [consumer price index] report. The unexpected jump to 8.6% last month, when many believed inflation had peaked, helped trigger the Fed’s 75 basis point rate hike.

This afternoon, the high point is US inflation for June, with economists forecasting a rise to a new 40-year high of 8.8% from 8.6%.

The Bank of Canada is expected to raise interest rates again todayby 75 basis points to 2.25%, prefiguring a similar decision by the US Federal Reserve at the end of this month.

On the markets, the euro remains at the center of concerns. The single currency was a hair’s breadth from reaching parity with the dollar yesterday, hit by fears of a recession and an energy supply crisis, and fell to $1.00001 at one point. It is now trading at $1.003, its lowest level in 20 years and down nearly 12% this year. The pound also hit a fresh two-year low below $1.19 yesterday and currently sits at $1.1901, up 0.1% on the day.

Asian equity markets posted some modest gains, with Japan’s Nikkei rising 0.4%, Hong Kong’s Hang Seng and the Shanghai Composite Index giving up earlier gains and remaining flat. European stock markets are expected to retreat at the open.

Agenda

  • 9am BST: International Energy Agency oil market report
  • 10am BST: Eurozone industrial production for May
  • 1:30 p.m. BST: US inflation for June (forecast: 8.8%)
  • 15:00 BST: Decision on interest rates in Canada (forecast: 2.25% vs. 1.5%)



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