Economic output increased by 0.4% in May, after zero growth in April, the Office for National Statistics said. A Reuters poll of economists had pointed to a 0.2% monthly increase.
The strength of the upturn could dissuade the BoE from beginning to cut interest rates as soon as August 1, its next scheduled monetary policy announcement date. Three policymakers this week emphasised the strength of domestic price pressures.
The chance of a rate cut in three weeks’ time fell below 50% on the futures markets from just above 50% on Wednesday.
May saw a broad-based increase in economic output, with the services, manufacturing and construction industries all growing and the latter up by 1.9% on the month, driven by house-building.
The figures represented an early boost for the new Labour administration, which has set itself the aim of achieving the fastest growth among the Group of Seven advanced economies on a sustained basis.
“The improving economic outlook suggests the government may benefit from the economic recovery being stronger than most forecasters anticipate,” Ashley Webb, an economist with consultancy Capital Economics, said.
Britain’s economy appears to have snapped out of its low-growth rut, at least for now. Output has grown by 1.5% since the turn of the year, marking its best five months since early 2017, excluding the rebound from the COVID-19 pandemic.
Goldman Sachs on Thursday nudged up its growth forecast for 2024 to 1.2% from 1.1%.
Still, the longer-run picture remains weak, with the economy only 2.7% larger than its pre-pandemic level of late 2019.
According to the latest quarterly data, only Germany has fared worse since the pandemic.
Over the three months to May, the economy expanded by 0.9%, the strongest reading since the three months to January 2022, compared with the consensus forecast for a 0.7% expansion.
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