UK GDP Up in May; But Lower Than Expected

MAY GDP +0.8% M/M (PREV +2.0%), +24.6% Y/Y (PREV +27.4%)

MAY INDEX OF SERVICES +0.9% M/M; +23.4% Y/Y; PRV +2.8% M/M, MED +1.6%

MAY IND PRODUCTION +0.8% M/M, PRV -1.0%, MED +1.5%

MAY MANUFACTURING -0.1% M/M, PRV 0.0%, MEDIAN +1.0%

MAY CONSTRUCTION -0.8% M/M, PRV -0.7%, MEDIAN +1.0%

• M/M GDP ticked up 0.8% in May, showing the fourth consecutive gain but coming in weaker than expected (BBG: 1.5%). In May, GDP was still 3.1% below the pre-pandemic level.
• Y/Y GDP was up 24.6% in May, reflecting base effects as the economy was largely closed in May 2020.
• The service sector recorded the largest upward contribution to GDP growth, rising by 0.9% in May and adding 0.76pp to growth.
• Within services, accommodation and food services saw the largest gain, up 37.1%, as restaurants and pubs were able to open indoors. Food services rose by 34.0% in May, while accommodation services were up 39.3%. The ONS noted that also hotels saw a marked recovery as restrictions lifted.
• Industrial output rebounded to 0.8% in May, mainly due to adverse weather conditions leading to higher output of electricity, gas and air supply.
• Manufacturing output eased by 0.1% as transport equipment production fell by 16.5%, the largest drop since Apr 2020. The decline was driven by the shortage of microchips which disrupted car production.
• Construction output fell by 0.8%, but remains above the pre-crisis level.
• Looking ahead, if GDP was flat in June, economic growth in Q2 would grow by 4.5%. This would be the largest growth rate since Q3 2020 and the second highest since 1973.