The UK economy jumped in May as doctors and travel agents became busy

LONDON, July 13 (Reuters) – Britain’s economy grew unexpectedly in May, driven by increasing doctor appointments but also wider demand for things like holidays, according to data that could reassure the Bank of England about its plans to continue raising interest rates.

Economic output expanded by 0.5% in May although consumer services fell as rising inflation hit consumers.

A Reuters poll of economists pointed to zero growth in May from April.

Health services are a major driver of growth, the Office for National Statistics said, citing “a huge increase in GP appointments”.

Delivers on the road also had a busy month, as travel agencies managed to pent-up demand for the holidays, the ONS said.

The Bank of England predicted that GDP would contract during April-June but some economists said Wednesday’s data suggested that could now be avoided.

“It won’t take much for quarterly Q2 growth to now be positive overall,” analysts at RBC Capital Markets said.

Other economists said the May rise was likely to represent a blip in countries across Europe struggling to contain inflation driven by rising energy prices.

“It’s too early to break the champagne, as the release details still point to an economy under pressure as the cost of living crisis is squeezing households’ ability to spend, ”the UBS economist said. and Dean Turner.

In the three months to May, GDP rose 0.4%, compared to the Reuters poll forecast of 0.0%, after the ONS said the April fall was not as big as first estimated.

Britain’s new finance minister, Nadhim Zahawi, welcomed the signs of growth but said there was no room for complacency.

“We are working alongside the Bank of England to bring down inflation and I am confident that we can create a stronger economy for everyone across the UK,” he said in a statement.

Despite concerns that Britain could fall into a recession later this year, the BoE is expected to raise borrowing cost rates for the sixth time since December 4 with the only question for to investors in relation to the size of the increase. Britain’s inflation rate is on course to hit 11% in October, the BoE said.

Sterling rose immediately after Wednesday’s data.

Most of the candidates to replace Boris Johnson as prime minister, including Zahawi, say they will cut taxes to grow the economy again. Former finance minister Rishi Sunak, who is also involved in the race, said he wanted to control inflation first.

The ONS revised its estimate of GDP growth in April to show a fall of 0.2% on the month, a slightly smaller decline than originally thought.

Consumer -facing services fell 0.1% in May from April as inflation accelerated and workers faced tax increases introduced in April. The decline included a 0.5% fall in retail trade and contrasted with April’s 2.2% increase.

The ONS said the data could be volatile at times when bank holidays have moved from their usual months – as happened in May – but it said it was confident the adjustments had taken place. its the effects of change.

Reporting to William Schomberg; edited by William James and Andrew Heavens

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