UK Economy Faces Unexpected Shrinkage in May
Britain's economic output fell by 0.1% in May, deviating from economic forecasts of a 0.1% rise. The early 2025 growth was driven by a tax break expiry boosting home purchases and manufacturing adjustments to US tariffs. The BoE estimates a 0.25% growth in the second quarter.
In a surprising turn, Britain's economic output contracted by 0.1% in May, as recent figures showed on Friday. This decline contradicts earlier predictions by Reuters-polled economists, who anticipated a modest 0.1% increase from the previous month's levels.
The UK economy had initially shown a strong performance in the first quarter of 2025, surpassing other Group of Seven nations' growth. The Bank of England, reflecting on this initial momentum, revised its annual growth forecast to 1% earlier. However, much of the early growth was influenced by a tax relief's end, enhancing home sales before its lapse, and preemptive measures by manufacturers against looming US tariffs.
The Bank of England currently estimates that the economy expanded by approximately 0.25% in the second quarter of the year. As analysts examine these figures, concerns about the UK's longer-term economic trajectory remain prominent.
(With inputs from agencies.)
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