More visits to GPs, a boom in holiday bookings and a surge in road haulage were the main drivers behind the surprising jump in Britain’s economy in May. The latest ONS figures for May showed that GDP grew by 0.5%, beating analyst forecasts of 0.1%.
Growth was spread across the manufacturing, services and construction industry which was boosted by new house building as well as home improvements.
This is great news, suggesting that the UK is still some way from tipping into recession but it also means that the Bank of England will be more aggressive about raising interest rates in its attempt to temper inflation.
Until now, the Bank has held off jacking up rates too swiftly for fear of making matters worse by frightening the public so much they will stop spending. It doesn’t seem to have worked.
Economist Julian Jessop points out that under the bonnet of the figures, GDP actually grew by 0.7% in May if you strip out spending on test and trace and the vaccination programme, suggesting the private sector is holding up well. Indeed, manufacturing rose by 1.4 per cent while construction was up 1.5 per cent, marking its seventh month of growth.
At least the figures give the new chancellor Nadhim Zahawi – who may have only two months in the job – a moment in the sun. Zahawi, whose own platform to be Tory leader contains huge and uncounted tax cuts, said it was ‘great’ that UK plc was back into positive territory, adding quickly he was not complacent.
