The level of U.K. economic activity picked up in May after two months of straight declines, giving tentative signs that the U.K. economy was on the road to recovery. Nevertheless, the rise of 1.8 percent sequentially was below consensus expectations of a growth of 5.5 percent. Furthermore, in comparison to the cumulative fall of 25.9 percent seen throughout both March and April, the rise in May was unequivocally modest. Markedly, growth on a rolling three-month basis turned more negative, falling from -10.8 percent to -19.1 percent in the three months to May.
Delving into details, rises were seen throughout all three broad sectors of the economy in May with output in both the industrial and construction sectors printing widely in line with expectations. Below expected rebound in the largest part of the U.K. economy, the services sector, however, accounted for most of the undershoot in May GDP relative to the projection.
Services sector output was likely to record a smaller rebound in May, comparative to the other sectors given that it would have still been more-acutely impacted by lockdown restrictions. Nevertheless, the disappointing recovery implies that even as lockdown restrictions were being eased, activity throughout those areas of the economy that rely on face-to-face interaction was returning only cautiously.
Together with the falls in both March and April activity, today’s outturn signifies that the level of U.K. GDP is still around 25 percent below its pre-Covid 19 peak, and leaves the economy on track to register its sharpest quarterly fall on record in the second quarter, noted Lloyds Bank in a research report.
“With lockdown restrictions being eased further from June, however, it seems likely that output will have picked up over the remainder of the quarter. Nevertheless, as today’s numbers have shown – the recovery is likely to be uneven across sectors – and significant uncertainty is likely to remain around the outlook for the second half of the year”, added Lloyds Bank.
