UK Growth Exceeds Forecasts in May as Services Offset Weakness in Industry

The UK economy expanded 0.1% in May, exceeding expectations for no growth, according to data from the Office for National Statistics (ONS).

The latest figures indicate continued economic resilience, although performance remains uneven across sectors. Rising energy costs linked to geopolitical tensions in the Middle East continue to be monitored as a potential factor affecting the broader economic outlook.

Services sector drives growth

Services were the main contributor to May's expansion.

Key areas of strength included:

1. Scientific research activities, particularly in medical sciences, provided the largest contribution.
2. Employment-related activities increased 3% month-on-month.
3. Health output rose 0.4%.
4. Consumer-facing services, including retail, increased 0.5%.

Industrial activity remains under pressure

Other parts of the economy showed weaker performance:

1. Production output declined 0.5%.
2. Construction activity fell 0.8%.

The data highlights a continued gap between stronger service-sector activity and weaker industrial performance.

Bank analysts assess the outlook

Deutsche Bank noted that the UK's three-month growth rate reached 0.8%, above estimates of sustainable quarterly growth, suggesting future moderation may be possible.

UBS said the impact from Middle East developments has remained limited so far, highlighting growth in professional and scientific services. The bank estimated second-quarter GDP growth at 0.4% quarter-on-quarter, while noting that stronger monthly data can sometimes be followed by softer periods.

JPMorgan increased its annualized second-quarter growth forecast to 1.5% from 1.0%, citing stronger consumer activity and service-sector performance.

Capital Economics said the economy has expanded compared with the period before the Iran conflict began, while noting that persistent inflation pressures could create challenges for future growth.

Markets will continue monitoring upcoming economic data, inflation developments, and Bank of England policy signals for further indications of the UK's growth outlook.

Data sourced from the UK Office for National Statistics, with analysis from Deutsche Bank, UBS, JPMorgan, and Capital Economics. This article is provided for informational purposes only and does not constitute investment advice.