U.K. Economic Growth Misses Forecast as Restrictions Eased

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The U.K. economy grew at a slower-than-expected pace in May as the government eased some of the coronavirus lockdown restrictions.

Gross domestic product rose 1.8% from April, when it plunged by a record 20.3%, the Office for National Statistics said Tuesday. That’s lower than the 5.5% forecast for the month, and it left output down by 19.1% in the latest three months.

April probably represented the nadir for the economy but Britain faces an uphill struggle, with surveys suggesting people remain anxious about returning to restaurants and going on holiday. That’s bad news for an economy that relies heavily on consumer spending for growth.

According to the latest Bloomberg survey, the economy is set to shrink by almost 9% this year – the most in almost century — and few predict a rapid recovery, with output still likely to be lower at the end of next year than it was before the crisis struck.

With unemployment set to surge as government wage subsidies are withdrawn, Chancellor of the Exchequer Rishi Sunak last week announced a 30 billion pounds ($37.5 billion) stimulus package in an effort to revive confidence among consumers and businesses. The challenge facing the government is how to return to a semblance of normality without triggering an economically devastating second wave of infections.

Output rose across the board in May, led above 8% gains in both manufacturing and construction as some workers were allowed to return to work. The dominant services industry expanded just 0.9%, as much of much of the sector remained subject to lockdown.

Garden centers reopened in May and some sporting activities were permitted, and estate agents began on-site viewings of properties. The economy received a further boost in June with the reopening of non-essential stores, while much of the hospitality industry resumed trading earlier this month.

— With assistance by Harumi Ichikura

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