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UK’s economic rebound slowed in May, carmakers hit by chip shortage

UK’s economic rebound slowed in May, carmakers hit by chip shortage

By William Schomberg and David Milliken

LONDON: Britain’s post-lockdown economic rebound slowed sharply in May, according to official data which also showed the impact on the country’s car makers from a global shortage of microchips.

Gross domestic product grew by 0.8% from April, the Office for National Statistics said, a lot weaker than the median forecast of 1.5% in a Reuters poll of economists.

The Office for National Statistics revised down its figure for growth in April to 2.0% from its previous estimate of 2.3% – reflecting a reduced contribution from COVID testing services – although the estimate for March was increased.

“Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon,” Paul Dales, an economist with Capital Economics, said.

Sterling fell slightly after the figures were published.

The Bank of England expects Britain’s economy to grow by 7.25% this year, the fastest annual growth since 1941 when Britain was rearming during World War Two. Last year output plunged by almost 10%, the biggest drop in more than 300 years.

April saw the easing of restrictions for non-essential retailers, hairdressers and pubs and restaurants that could serve customers outside. In May, hospitality firms were allowed to resume indoor service.

“The sharp slowdown in growth suggests that the recovery is losing a little steam as the temporary boost, from the earlier phases of reopening, fades,” Suren Thiru, head of economics at the British Chamber of Commerce, said.

Despite the slowdown in May, the 0.8% growth rate was faster than typical pre-pandemic, month-on-month rises in GDP.

Britain’s dominant services sector grew by 0.9% from April, including a huge 37.1% monthly jump for accommodation and food services.

News source- Economic Times

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