UK GDP grew just 1.8% in May as services remained weak

Growing just 1.8% on April, below consensus expectations for 5%, meant GDP in the three months to May remained a seismic 19.1% below the same three-month period last year. Services grew a meagre 0.9%, while industrial and construction output increased 6% and 8.2%, respectively.

Services

As lockdown restrictions were still largely in force throughout May, the important services sector (~80% of UK GDP) remained weak and grew only 0.9% month-on-month in May according to the ONS’ Index of Services.

This followed a record 18.9% month-on-month decline in the index in April and 7.5% decline in March.

Wholesale and retail trade along with repairs of motor vehicles was the services sub-sector that contributed the most to April’s record decline in services output. In May, however, this feature of the data reversed and this sub-sector became the largest contributor to the growth in services, rising by 12.9% in May.

A decrease of 3.8% in professional, scientific and technical activities and a fall of 2.8% fall in information and communication dragged on overall services growth.

Industrial Output

Despite remaining 19.1% below February’s level, industrial output grew 6% month-on-month in May.

The rise in industrial output was driven by manufacturing output which was higher by 8.4% in May and the largest increase recorded since February 1979’s month-on-month growth of 9.5%.

Driving manufacturing output higher was rubber and plastic products, which grew 32.5% in May. 11 of the 13 manufacturing sub-sectors made positive contributions to manufacturing growth.

Construction Output

Construction output in May remained 38.8% below February’s level of £13.5bn, after declining 40.2% month-on-month in April, although it rose 8.2% month-on-month in May to approximately £8.3bn.

The ONS splits total construction output into two types of ‘work’ – (1) New work & (2) Repair and maintenance.

New work is then split into: (1) New housing, (2) Other new work/Infrastructure & (3) New work (excl. infrastructure), while repair and maintenance is split into: (1) Public housing, (2) Private housing & (3) Non-housing repair and maintenance.

Total new work grew 11.1% in May to ~£5.5bn.

Of the two constituents of new housing, work on new public housing rose 42.1% to £240m, which was the most since records began in 2010. Work on new private housing rose 21.4% to ~£1.3bn, which was also the largest rise since records began in 2010.

Total repair and maintenance grew 2.7% to ~£2.7bn.

Non-housing repair and maintenance (the biggest of the three constitutents) rose 4.7% to ~£1.7bn, while private housing maintenance grew 4.4% to £759m in May. Public housing maintenance was the only constituent of the three making up total repair and maintenance that decreased, falling by 9.5% to £313m in May.