'This weakness in May should be understood as a one-off, and a reversal can be expected in next month’s data.'
The UK's gross domestic product shrank by 0.1% in May, the Office for National Statistics said today (13 July).
The dip came after 0.2% growth in April 2023, but looking more broadly, GDP showed "no sign of growth" in the three months to May 2023 when compared with the three months to February 2023, the ONS said, considering it fell 0.3% in March 2023.
Production output decreased by 0.6% over the month, after a 0.2% dip in April, making it the main contributing sector for the GDP decrease in May. According to the ONS, the extra bank holiday on 8 May also contributed to the economic contraction.
The construction sector also fell by 0.2% after a decrease of 0.9% in April, alongside output in consumer-facing services which was down 0.2% in May despite reporting growth of 1.1% the previous month.
Services output stayed put by recording no growth over the month following growth of 0.3% in April.
Chancellor of the Exchequer Jeremy Hunt said: "While an extra bank holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.
"The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it."
The economic contraction should be cause for concern but not yet panic, according to Jeremy Batstone-Carr, European strategist at Raymond James Investment Services.
He said: "This weakness in May should be understood as a one-off, and a reversal can be expected in next month's data. However, it is yet to be seen whether this will be sufficient to deliver growth over Q2 as a whole - the expectation is it will, but only just.
"Most concerning are the declining figures in manufacturing and industry, which demonstrate an ongoing weakness in overall domestic activity and overseas demand for UK exports."
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Neil Birrell, CIO at Premier Miton Investors, added: "Admittedly, we are a month on from that now and the economy could be weaker still, but this would not have been the picture the Bank of England wanted to see.
"With inflation still rife, this keeps the pressure firmly on the [central] bank to keep raising interest rates, putting even more pressure on the consumer in particular."
