LONDON (Reuters) – Britain’s post-lockdown economic rebound slowed sharply in May despite further easing of social distancing rules, official data showed that also showed the blow to automakers from a global shortage of microchips.
Gross domestic product grew 0.8% per month, much faster than its typical pre-pandemic pace, but down from April’s 2.0% rise and much weaker than forecast median of 1.5% in a Reuters poll of economists.
“Of course, the pace of the recovery was always going to slow as the economy recovered to its pre-crisis level. But we didn’t expect it to slow down so soon so soon,” said Paul Dales, economist at Capital Economics.
Britain suffered one of the biggest hits from the pandemic among advanced economies last year, and GDP in May was 3.1% below its February 2020 level, the last full month before the country is crashing for the first time.
The pound fell slightly after the figures were released.
The Bank of England expects Britain’s economy to grow 7.25% this year, the fastest annual growth since 1941, when Britain rearmed itself in World War II. Last year, production plunged nearly 10%, the biggest drop in over 300 years.
The month of April saw the easing of restrictions on non-essential retailers, hairdressers, pubs and restaurants that could serve customers outside. In May, hotel companies were allowed to resume domestic service.
Britain’s dominant service sector grew 0.9% weaker than expected in May compared to April, as a huge monthly jump of 37.1% for accommodation and food services n failed to offset slower increases elsewhere in the industry.
Supermarket sales plummeted as more people ate in restaurants, and educational output plummeted due to a drop in school attendance. The reduction in COVID-19 testing has also weighed on GDP.
Industrial production rose 0.8%, but manufacturing contracted slightly. The chip shortage plaguing automakers led to the biggest drop in production since April 2020, the ONS said.
Data released earlier this week showed that Germany’s industrial production fell in May as semiconductor bottlenecks helped slow the recovery in Europe’s largest economy.
Output in the UK construction industry contracted 0.8% from April, hit by the fourth wettest May since 1862.
Dales of Capital Economics said the drop may also reflect material and labor shortages.
NEW RELAXATION – REBOUND OR RISK?
Prime Minister Boris Johnson plans to lift most of the remaining restrictions from a third lockdown on July 19, after a rapid rollout of COVID-19 vaccinations.
Rory MacQueen, an economist at the National Institute for Economic and Social Research, a think tank, said Johnson’s decision could still backfire.
“It remains to be seen whether the lifting of new restrictions in July will contribute to continued strong growth in the third quarter or – if COVID-19 cases continue to rise – increased consumer caution and even another national lockdown, ”he said. .
New cases of the Delta variant of the coronavirus have accelerated in recent weeks, but data and private sector surveys covering this period do not suggest any major impact on hiring or consumer behavior in late June and early July.
The ONS downgraded its growth figure 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.
Compared with May of last year, when the country was in its first coronavirus lockdown, GDP grew by almost 25%.
The ONS said the release of trade figures was delayed until 11:00 GMT.
Reporting by William Schomberg and David Milliken