The UK’s GDP for May rebounded by 1.8%, according to figures from the Office for National Statistics (ONS) released today (14 July), falling 3.7 percentage points short of the 5.5% forecast by economists polled by Reuters.
While this is a small uptick, economic output remains at the lowest level seen in more than a decade as lockdown continued to hamper economic activity.
Overall, the UK's GDP has fallen by 19.1% in the three months to May.
Jonathan Athow, deputy national statistician for Economic Statistics, said: "Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.
"In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines."
The research team at Capital Economics called the 1.8% month-on-month rise in May a "disappointing first step on the road to recovery" and that it suggests hopes of a rapid rebound from the lockdown are "wide of the mark".
"The path to full economic recovery will probably be much longer than most people anticipate," it warned.
"The rebound was pretty weak across the board with construction, where workers were encouraged to return to sites in May, only rising by 8.2% month-on-month. The rebound in industrial production was even more lacklustre, rising by just 6% month-on-month. But the most worrying aspect was the dismal 0.9% month-on-month increase in services output.
"Indeed, activity in the arts, recreation and culture category fell by an additional 11.3% month-on-month in May. Altogether, the poor rebound in May, combined with downward revisions to activity in March and April means that the economy was still 24.5% below its February peak in May."
Robert Alster, head of investment services at Close Brothers Asset Management, said these are "undoubtedly worrying figures".
"For the economy to only grow by 1.8% in May, the month where lockdown started to ease, points to choppy waters ahead. The Government will be hoping that we have already reached economic 'rock bottom' and that these latest figures are the start of a consistent, upward rebound," he said.
"While GDP has improved slightly, it is worth noting that the economy is still 25% smaller than it was in February, before the pandemic took hold. Jobs, both on the high street and in industry, are disappearing at an alarming rate and there are no signs yet of any real improvement in the UK labour market."
He added: "With jobs critical to supporting consumption, it is difficult to know whether the Chancellor is being too bullish in his determination to withdraw the Jobs Retention Scheme by October. There is no question that this decision risks more economic contraction."
Paul Craig, portfolio manager at Quilter Investors, expects the "grim readings to continue" with the employment figures out later this week.
"Throw in the added complication of the Brexit trade negotiations and it is clear sentiment may remain dampened for some time for the UK," he said. "However, opportunities do exist. While UK companies are no longer at bargain prices, there are quality and innovative companies in the small and mid-cap space. With further stimulus expected come the Autumn, these companies may be the ones to benefit greatly."
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