Closing post
Time to recap…
Britain’s economy unexpectedly shrank in May, fuelled by sharp declines in manufacturing and construction.
The Office for National Statistics said gross domestic product fell by 0.1% in May, missing City predictions of a 0.1% monthly expansion. This is the second monthly fall inn a row, driven by a drop in production and construction outout.
Chancellor Rachel Reeves described the drop in output as “disappointing’, saying:
“Getting more money in people’s pockets is my number one mission. While today’s figures are disappointing, I am determined to kickstart economic growth and deliver on that promise.
“The choices we have made in our first year in government have seen us extend the £3 bus fare cap, fund Free School Meals for over half a million more children, press ahead with plans to deliver free breakfast clubs for every child in the country and increase the National Minimum and National Living Wage, giving a pay rise to 3 million workers.
“There’s more to do, that’s why in the Spending Review we boosted investment and jobs, through better city region transport and record funding for affordable homes, as well as backing major projects like Sizewell C.”
Economists suggested that the economy was now suffering the backlash from the jump in activity earlier this year, ahead of Donald Trump’s new tariffs.
The drop in activity puts more pressure on the Bank of England to lower interest rates, some experts suggested.
Rising trade war tensions are threatening to hurt global growth, after Donald Trump announced the US will impose a 35% tariff on imports from Canada from the beginning of August.
News of the plan knocked stock markets. After hitting a fresh intraday high at the start of trading in London, the FTSE 100 share index moved lower – it’s now down 42 points or 0.5% at 8932 points.
Germany’s DAX and France’s CAC are both down almost 1%, while stocks have opened lower on Wall Street too.
The pound has weakened too, touching its lowest level in nearly three weeks against the US dollar, below $1.35.
Have a lovely weekend. GW
May’s unexpected 0.1% decline in GDP will make depressing reading for Rachel Reeves before a tough budget in the autumn, our economics editor Heather Stewart writes.
Stronger-than-expected growth would have helped to alleviate the squeeze on the public finances – but there is nothing in this latest data pointing to an upturn, she points out.
More here:
