BY Fraser Tennant
The UK economy grew by 0.5 percent in May 2022 after a decline of 0.2 percent in April, according to new figures from the Office for National Statistics (ONS).
Economists had expected zero growth in May alone, and in the three months to May, amid the UK’s cost of living crisis.
The ONS reports that the services sector was responsible for the majority of the increase in growth, with a particular emphasis on human health and social work activities. A surge in GP appointments has also aided the UK economy, helping to prop up health service activity, despite a huge drop in test and trace vaccinations.
Less positively, the ONS figures provide proof that the UK consumer base is on shaky ground, with consumer-facing services such as retail trade, food and beverage, travel and transport, and entertainment and recreation, seeing output fall 0.1 percent. In addition, consumer-facing services were 4.7 percent below pre-coronavirus (COVID-19) levels.
“While it is positive to see a small nudge upwards in overall GDP, these figures are hardly shooting the lights out,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. “It will take something strong to fully reverse fears the UK’s heading towards a recession in the coming year. Until there is a clear path out from political turmoil, the energy crisis, cost-of-living squeeze and the UK’s far-reaching productivity problems, it is hard to see where the economy will find its take-off point.”
Sharing the fear that the risk of recession has only been temporarily allayed is James Brown, a managing partner at Simon Kucher & Partners, who suggests that UK businesses may respond to a looming recession by raising prices.
“It is looking increasingly likely that a meaningful price adjustment will be one of the few tools remaining at the disposal of UK businesses,” he concludes. “While the surprise increase in growth comes as welcome news, the possibility of the UK entering a recession during the second half of 2022 and beyond still looms large.”
News: UK economy returns to growth aided by travel rebound and haulage