In May of this year, the British economy saw an unexpected growth spurt, which has provided a significant boost for the new government under Prime Minister of the United Kingdom Keir Starmer.
According to Office for National Statistics data, economic output increased by 0.4%, surpassing earlier expectations. Reuters economists had forecasted a GDP growth of 0.2%.
This uptick in growth poses new challenges for the Bank of England, particularly regarding its upcoming decision on interest rate cuts scheduled for August.
Internal price pressures will play a crucial role in determining policy, and the likelihood of a rate cut has dipped below 50% at the start of the trading week.
The growth observed in May expanded onto various sectors of the economy, including services, manufacturing, and construction, with the latter increasing by 1.9% due to higher activity in housing construction.
These figures have provided initial momentum for the Labour Party's agenda aimed at achieving sustainable economic growth that outpaces the average among the G7 nations.
Economists suggest that the improving economic outlook indicates the government may experience a stronger recovery than previously anticipated.
Aside from that, the data demonstrate the strongest quarterly growth of 0.9% in the three months leading up to May, surpassing the expected increase of 0.7%.
The Bank of England's forecast, which projected a 0.5% growth in the second quarter, now appears conservative.
Analysts note that these GDP figures may diminish the likelihood of an interest rate cut in August, as they offer sufficient grounds for the Monetary Policy Committee to delay easing measures in response to inflationary pressures.
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