Economic Growth
The British economy shrank unexpectedly in May, with a standard measure for economic growth, gross domestic product (GDP), at 0.1%. This was despite economists predicting growth of 0.1% after large falls in production and construction were observed.
Previous Contraction
The contraction in May followed a 0.3% contraction in April, when Donald Trump’s country-specific tariffs were announced, triggering a global trade war. A 90-day break for these import taxes had been extended, allowing for a return to more normality.
Reaction to the News
The news was described as "disappointing" by Chancellor Rachel Reeves, who stated that the growth of the economy is the government’s top priority. She added that she is determined to start economic growth and keep this promise.
Mixed Picture
However, the picture wasn’t all bad. Growth in March was revised upwards to 0.4%, indicating that companies were investing in preparation for the tariffs. This expansion in March means that the economy is still growing when viewed over a three-month period.
Reasons for the Contraction
The production decline was mainly due to slow car production, less oil and gas production, and a decline in the pharmaceutical industry. However, the service industry, which makes up most of the economy, expanded, with law firms having a good month.
Overall Impact
Despite the contraction in May, the economy is still growing over the three-month period. The government remains committed to prioritizing economic growth, and the Chancellor has pledged to start economic growth and keep this promise.
