The UK economy is expected to have remained largely stagnant in May, with most economists forecasting a meager 0.1% increase in gross domestic product (GDP), following a 0.1% decline in April. The Office for National Statistics (ONS) is set to release the data on Thursday, amid ongoing global turbulence from the US-Israel conflict with Iran.
Weak Growth Forecasts
Most economists predict GDP edged up by just 0.1% in May, after a sharp pullback from 0.3% growth in March and 0.4% in February. April's contraction was the first since August last year, led by a decline in the services industry, the UK's largest sector. Some experts believe growth may have flatlined or even fallen again in May.
Pantheon Macroeconomics forecasts no growth in May, but suggests the economy could still expand by 0.2% in the second quarter overall. Deutsche Bank is more pessimistic, expecting a 0.1% decline, with chief UK economist Sanjay Raja noting sluggish activity in services, including information, professional, and financial services, as well as real estate.
Impact of Iran War and Fuel Costs
Surging fuel and energy costs have squeezed businesses and households since April, remaining elevated in May, though wholesale prices have eased in recent weeks. Chancellor Rachel Reeves stated the conflict "was not a war we wanted or joined, but one that will have an impact at home."
Pantheon Macroeconomics analysts expect another weak performance from services, but a mixed picture across the wider economy, with subsectors like energy supply boosted by higher oil prices.
Potential Boost from World Cup
Looking ahead, Sanjay Raja noted it was "not all bad news," as retailers reported promotions and warmer weather boosting demand for items like outdoor furniture and fans. He also suggested that England's progress in the FIFA World Cup could provide a boost in July, with pubs and bars benefiting from extended hours and busier periods.
