RISHI Sunak’s core pledge to “grow the economy” has been dealt a blow after the latest statistics showed the UK economy contracted over the past month.
The figures for May, published on July 13, show that the UK economy shrank by 0.1%, measured by GDP.
Darren Morgan, director for economic statistics at the ONS, said that economy had showed “no growth” over the three-month period to the end of May.
In April, it had grown by 0.2%.
The contraction in May was put down to the effect of an extra bank holiday weekend for the King’s coronation, meaning sectors like construction and finance lost a working day in the month.
Economists had been expecting the economy to shrink slightly more. Deutsche Bank thought the monthly GDP decline would be 0.3%, while Investec Economics had predicted 0.5%.
Morgan said: “GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal.
“Meanwhile, despite the coronation bank holiday, pubs and bars saw sales fall after a strong April. Employment agencies also saw another poor month.
“However, services were flat overall with health recovering, with less impact from strikes than in the previous month, and IT also had a strong month.
GDP fell 0.1% in May 2023. ▪️ Services were flat (0.0%) ▪️ Production fell 0.6% ▪️ Construction fell 0.2% ➡️ https://t.co/Z94htJo1G0 pic.twitter.com/oeYBJNy5id
— Office for National Statistics (ONS) (@ONS) July 13, 2023
“Across the last three months as a whole the economy showed no growth.”
ITV's Robert Peston said the figures showed the UK was experiencing "stagflation" – a situation where the economy is not growing but inflation rates are high.
Peston wrote: "Every sector of the economy flatlined or shrank in May. And in the latest three months, the UK economy stagnated. With inflation more than four times target, this is proper stagflation."
Chancellor 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.”
Sunak has also pledged to "halve inflation" from 10.7% in the last quarter of 2022 to 5.3%. Figures for April and May put it at 8.7%.
