UK economy contracts again in May, missing expectations for slight rebound

The U.K. system shrank again successful May, information showed Friday.

The latest monthly maturation figures from the Office for National Statistics showed U.K. gross home merchandise (GDP) contracted 0.1% month-on-month successful May. Analysts polled by Reuters had expected a 0.1% expansion.

Weakness was concentrated successful accumulation output, down 0.9%, and construction, which fell 0.6%. The figures volition travel arsenic a stroke to Finance Minister Rachel Reeves, who has made rebooting economical maturation and reducing the U.K.'s fund deficit her halfway aims.

The latest information follows a contraction of 0.3% successful April when home taxation rises were introduced and U.S. President Donald Trump announced tariffs connected trading partners and adversaries alike. The tariffs frenzy sent planetary markets into a tailspin and created wide concern uncertainty.

The U.K. was deed with a 10% "reciprocal tariff" from Trump contempt having a more-or-less balanced trading narration with the U.S. erstwhile it comes to the speech of goods, though it runs a ample surplus erstwhile it comes to services, according to ONS commercialized information for 2024.

Britain has since struck a commercialized woody with the U.S., however, becoming the archetypal state to bash truthful arsenic tetchy commercialized talks proceed for different trading partners, including the European Union which is inactive waiting to motion a commercialized statement with Washington.

Despite having the comfortableness of a U.S. commercialized deal, the U.K. is facing home economical headwinds and the archetypal quarter's bumper 0.7% enlargement successful GDP (attributed to a apt frontloading of economical enactment up of Trump's commercialized tariffs) is not expected to beryllium repeated successful consequent quarterly updates. The archetypal estimation of 2nd 4th (Q2) GDP is owed connected Aug. 14.

Instead, economists expect maturation to dilatory successful the remainder of the twelvemonth amid a weaker jobs market and ongoing economical uncertainty, portion the Bank of England forecasts a lackluster 1% maturation complaint successful 2025.

Sanjay Raja, main U.K. economist astatine Deutsche Bank, predicted that GDP maturation would borderline up connected a monthly ground successful May, but tempered expectations going forward.

"Where to next? Relative to our baseline projections, downside risks person emerged astir our Q2-25 and 2025 yearly projections," Raja said successful emailed comments Thursday.

"The 'awful April' GDP people sets america backmost a tenth connected our quarterly GDP projection (our nowcasts are moving person to 0.1-0.2% quarter-on-quarter versus our authoritative projection of 0.25% q-o-q). This besides raises a tenth downside to our yearly maturation projection of 1.2%," helium said.

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