UK GDP Growth Slows To 0.8 Pct In May Despite Easing Of Restrictions

LONDON, (UrduPoint / Pakistan Point News - 12th Jul, 2021 ) :Britain's gross domestic product (GDP) is estimated to have grown by 0.8 percent in May 2021, but remains 3.1 percent below the pre-COVID-19 pandemic levels seen in February 2020, the British Office for National Statistics (ONS) said Friday.

Although May saw the fourth consecutive month of rise as COVID-19 restrictions continued to ease, it was slower when compared with March at 2.4 percent and April at 2.0 percent, said the ONS.

In May, the service sector increased by 0.9 percent, with accommodation and food service activities growing by 37.1 percent as restaurants and pubs reopened indoors, said the ONS.

Output in the manufacture of transport equipment plunged by 16.5 percent, its largest fall since April 2020 as microchip shortages disrupted car production, said the ONS. Meanwhile, the construction sector contracted for a second consecutive month in May 2021, by 0.8 percent, but remains 0.3 percent above its pre-pandemic level in February 2020.

"UK GDP rebounded only slightly in May, as falls in manufacturing, retail and construction helped to offset the reopening-rebound in consumer services," said James Smith, a developed markets economist at financial services firm ING, adding that "rising COVID-19 cases pose a challenge for the recovery over the summer but the medium-term story still looks fairly solid".

Independent economist Julian Jessop echoed the view, tweeting that May's 0.8 percent growth was disappointing as it was lower than the consensus expectation of 1.

5 percent, but not "enough to change my view that activity will be back to pre-COVID levels in Q3 (the third quarter)." British Prime Minister Boris Johnson said Monday that most COVID-19 restrictions are set to end on July 19 as part of the final step of England's road-map out of the lock-down. This will be confirmed on July 12.

Andrew Goodwin, chief UK economist in the British think tank Oxford Economics, said this week's news on the recovery was "decidedly mixed".

"On the plus side, most of the remaining restrictions are likely to be lifted on July 19, which should provide a further boost to activity. But May's GDP release disappointed with several sources of weakness, some of which may endure," said Goodwin.

"The disappointing GDP release will likely lead us to nudge down our forecast for 2021 GDP growth, albeit we still think the consensus is too low," said Goodwin.

The jump in COVID-19 cases "is increasing the degree of downside risk, both in terms of discouraging social consumption and risking restrictions being reimposed," he added.

More than 45.6 million people in Britain have received the first jab of COVID-19 vaccine and over 34.1 million people have received two doses, according to the latest official figures.

To bring life back to normal, countries such as Britain, China, Russia, the United States as well as the European Union have been racing against time to roll out corona-virus vaccines.