Thursday, July 25, 2024

UK economy returns to growth in May as shoppers hit high streets

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The UK economy returned to growth in May as more shoppers hit the high street, official statistics show.

The Office for National Statistics (ONS) said gross domestic product (GDP) increased by 0.4 per cent in May, representing a faster return to growth than many were expecting.

Economists had predicted that the UK’s GDP would grow by 0.2 per cent in May. The UK economy grew at the start of 2024, narrowly avoiding a recession, but stagnated in April when damp weather hit consumer spending.

The ONS’s director of economic statistics Liz McKeown said: “The economy grew strongly in May, with all the main sectors seeing increases.

“Many retailers and wholesalers had a good month, with both bouncing back from a weak April.

“Construction grew at its fastest rate in almost a year after recent weakness, with housebuilding and infrastructure projects boosting the industry.”

Responding to the news, Chancellor Rachel Reeves, said: “Delivering economic growth is our national mission, and we don’t have a minute to waste.

“That is why this week I have already taken the urgent action necessary to fix the foundations of our economy to rebuild Britain and make every part of Britain better off. A decade of national renewal has begun, and we are just getting started.”

Following Labour’s landslide victory at the general election last week, the new Government has announced a range of measures aimed at boosting growth.

Housebuilding targets will be reintroduced, the planning system reformed to end the ban on onshore wind farms and a National Wealth Fund has also been announced to attract investment.

Announcing the new measures, the Chancellor said that the UK economy would be £143.3bn larger – worth £5,053 for every household in the country – if it had grown at the average rate of OECD economies since 2010.

She said she was taking “immediate action to fix Britain’s economic foundations” as she promised a “new era for economic growth” for the UK.

Meanwhile, inflation has returned to the Government’s 2 per cent target after an extended period of soaring prices and a peak inflation rate of 11.1 per cent in October 2022. This was the highest level in 41 years.

As inflation decreases, the Bank of England is expected to start reducing interest rates, possibly as early as August, providing relief and hope for households facing sharp increases in their mortgage costs.

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