Faster UK economy gives growth gift to new government

Britain’s economy grew more quickly than expected in May, providing momentum for Prime Minister Keir Starmer’s new government but raising doubts about the possibility of a Bank of England interest rate cut next month.

Economic output increased by 0.4% in May, following a 0.2% rise in April, according to the Office for National Statistics. A Reuters poll of economists had predicted another 0.2% monthly increase.

The strength of the upturn added to skepticism that the BoE will begin cutting interest rates on August 1. Three policymakers this week emphasized the strength of domestic price pressures.

The chance of a rate cut in three weeks’ time fell below 50% in early trade on the futures markets on Thursday, down from just above 50% on Wednesday.

May saw a broad-based increase in economic output, with the services, manufacturing, and construction industries all growing. The construction sector was up by 1.9% for the month, driven by house-building.

via Reuters