UK Economy Contracts For Second Straight Month

(RTTNews) - The UK economy shrank for the second consecutive month in May, adding challenges to Chancellor Rachel Reeves in achieving her self-imposed borrowing rules.

Gross domestic product fell unexpectedly by 0.1 percent in May, following a 0.3 percent drop in April, data from the Office for National Statistics revealed on Friday.

GDP was forecast to grow 0.1 percent. Moreover, this was the second straight month of decline.

Among three main sectors, industrial production was the largest contributor to the monthly GDP fall, which was down 0.9 percent. Production declined 0.6 percent in April and 0.2 percent in March.

The monthly fall in manufacturing output deepened to 1.0 percent, the worst since July 2024, from 0.7 percent in April, data showed. Production of motor vehicles and trailers declined 3.7 percent largely reflecting the impact of US tariffs. Construction output fell 0.6 percent in May. These declines in production and construction were partially offset by an increase of 0.1 percent in services output. Nonetheless, in the three months to May, real GDP grew 0.5 percent compared with the previous three months. GDP expanded 0.7 percent in May from the previous year, the ONS said.

Chancellor Reeves said getting more money in people's pockets is her number one mission. "While today's figures are disappointing, I am determined to kickstart economic growth and deliver on that promise," Reeves added.

British Chambers of Commerce Head of Research David Bharier said strong and sustained growth is the only route out of the Chancellor's current fiscal trap.

However, Bharier noted that economic fundamentals remain strong and there are real opportunities for a step-change - particularly in AI, life sciences, and advanced manufacturing.

ING economist James Smith said May's GDP decline looks more like noise than signal. However, there are growing concerns about the UK economy, driven by weakness in the jobs market.

"If next Thursday's payroll figures are bad, then it would pile the pressure on the Bank of England to speed up rate cuts," the economist added.

Another data from the ONS showed that the visible trade deficit narrowed to GBP 21.7 billion in May from GBP 22.4 billion in the previous month. At the same time, the surplus on services trade increased to GBP 15.99 billion from GBP 15.9 billion a month ago.

As a result, the total trade balance showed a deficit of GBP 5.7 billion, which was below April's GBP 6.5 billion deficit.