Thursday, July 25, 2024

UK economy returned to growth in May

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The UK economy returned to growth in May after a washout month in April when activity flatlined, resuming the recovery from last year’s recession.

Figures from the Office for National Statistics (ONS) show gross domestic product rose by 0.4% month on month, after recording zero growth in April when wet weather hit consumer spending. City economists had forecast growth of 0.2%.

In the first week since Labour’s election landslide, the chancellor, Rachel Reeves, has promised to reboot the economy by making it the new government’s “national mission” to secure the highest sustained growth in the G7.

Keir Starmer, who became the first Labour leader to win power from opposition since Tony Blair in 1997, has taken office as the economy gradually recovers from a brief and shallow recession at the end of last year, when households cut back their spending amid the cost of living crisis.

Growth returned in the first quarter of this year, with the economy expanding by 0.7%. However, growth flatlined in April, the first month of the second quarter, as wet weather deterred consumers from spending on the high street.

Inflation has returned to the government’s 2% target after a prolonged period of soaring price rises and a peak inflation rate of 11.1% in October 2022. That was the highest level in 41 years.

As inflation comes down, the Bank of England is expected to start cutting interest rates, possibly as soon as next month, in a move that will provide relief and hope for households facing sharply higher mortgage costs.

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