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UK economy pulls back 1.8% in May as coronavirus blockades begin to ease

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Shoppers wearing face masks walk through the rain on Oxford Street in London on June 18, 2020, as some non-essential retailers reopen from their coronavirus shutdown.

Tolga Akmen / AFP / Getty Images

The UK economy grew by less than expected in May as the country began to gradually ease the stalemate.

Official figures revealed on Tuesday that GDP expanded by 1.8% in May per month. Economists surveyed by Reuters had expected a monthly return of 5.5%.

“Despite this, the level of production was not recovered from the fall of the first records in March and April 2020 and decreased by 24.5% compared to February 2020, before the full impact of the coronavirus,” the Office for National Statistics said in its release. .

The reading follows a monthly contraction of 20.4% in April, the country’s sharpest record, during the height of its widespread coronavirus containment measures that devastated economic activity.

During the three months to the end of May, GDP contracted at 19.1%. After the 2008 recession, GDP shrank by no more than 2.1% in a single quarter, the ONS said.

“The production and construction of homes showed signs of recovery as some businesses saw staff return to work,” said Jonathan Athow, deputy. National Statistical for Economic Statistics.

“Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic hit.”

He noted that while the retail sector sold record online sales in May, many other areas of the economy remained in “recession” and saw further declines as blocking measures remained in place.

‘Wild waters ahead’

Robert Alster, head of investment services at Close Brothers Asset Management, said Tuesday’s figures were “definitely worrying” and showed “steep waters ahead”.

“Jobs, both on the highways and in industry, are disappearing at an alarming rate and there are still no signs of any real improvement in the UK job market,” he said.

Finance Minister Rishi Sunak confirmed last week that the UK wool scheme, which subsidizes up to 80% of the wages of 9.3 million thorn workers and is mainly credited to alleviate the pandemic’s economic woes, will be withdrawn. in October.

“With critical work to support consumption, it is difficult to know whether the Chancellor is very strong in his determination to withdraw the Seating Scheme by October. There is no doubt that this decision risks further economic contraction,” he said. Alster.

However, Quilter Investor Portfolio Manager Paul Craig said that while the figures show that the recovery is unlikely to be quick, they signal that it has begun.

“Provided the UK does not have further closures like the experienced one, we need to start seeing that footage of this recovery will be shown in future updates,” Craig said in a statement Tuesday.

“Given that this is a rather backward set of data, it is important that investors do not divert attention from the opportunities that are available in the UK, as the economy tries to re-ignite in all cylinders.”

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