UK economy shrinks less than expected, but remains fragile

The UK economy shrank less than expected in May despite a holiday celebrating the coronation of King Charles III and the impact of strikes.

The overall picture for the UK economy remains bleak, while persistent inflationary pressures mean the Bank of England (BoE) could raise interest rates at its meeting in early August. (Source: AFP)

The figures show that a recession as the market has speculated based on rising inflation and high interest rates has not happened.

Britain's economic output fell 0.1% in May from April, the Office for National Statistics (ONS) said, after rising 0.2% in the previous month. A Reuters poll of economists had forecast a 0.3% decline.

All sectors of the economy contracted, except services, which did not grow.

The ONS said some businesses in the arts, entertainment and leisure sectors, as well as hotels and restaurants, reported gains from the coronation holiday. But there were also signs that strikes in the health, rail and education sectors had dented economic output.

A separate ONS report showed the UK's goods trade deficit widened more than expected to £18.7 billion in May, with exports to the European Union (EU) falling to their lowest level since January 2022.

Business associations say the overall picture for the economy remains bleak, while persistent inflationary pressures mean the Bank of England (BoE) could raise interest rates at its meeting in early August.

Britain’s economic recovery from the Covid-19 pandemic has lagged behind most other advanced economies. Paul Dales, chief economist at consultancy Capital Economics, said the UK economy is expected to grow by around 0.1% in the second quarter of 2023. That is higher than the Bank of England’s forecast of zero growth, but he noted that the UK economy is likely to suffer a mild recession later this year.

Mr Dales added that the inflation report due next Wednesday (July 19) could decide whether the BoE raises interest rates by another 0.5 percentage points or just 0.25 percentage points.

Source: https://baoquocte.vn/kinh-te-anh-suy-giam-it-hon-du-kien-du-van-mong-manh-234516.html