Britain’s economy unexpectedly grows in May
UK economy expanded by 0.5% in May after contracting by 0.2% in April and beat expectations minimum growth of 0.1%.
Unexpected growth in May comes after lower than expected GDP fall in April, adding to optimism about quarterly growth in Q2, although economists remain cautious and see May’s positive figure threatened by strong pressure on the economy from high inflation that lifts cost of living and squeezes households’ spending power.
Annualized figure showed the economy grew by 3.5%, compared to 3.7% expansion year ago, but well above forecasted 2.7% growth.
Fresh expansion was mainly driven by increased activity in health sector and services sector, particularly in leisure and travelling, while consumer-facing services dropped by 0.1% in May, compared to 2.2% rise in April, as inflation rose and tax increase was introduced in April that increased pressure on workers.
Britain’s new finance minister Zahawi expressed optimism on signs of growth and added that the government will work together with the Bank of England to curb inflation and build a base for stronger economic growth.
The Bank of England is on track to raise interest rates for the sixth time since December in its August 4 policy meeting, despite rising concerns that British economy could fall into recession in coming months, with the only question being the size of the rate hike.
The potential successors of Boris Johnson will face a tough work to stabilize the economy and bring it to growth track, with candidates showing a different approach to the hottest points – inflation and high taxes, as some want first to cut taxes to get the economy growing again, while others want to focus on soaring inflation, en-route to the same target.