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UK Economy Contracts for Second Month as Production and Construction Falter

May’s 0.1% decline underscores fragile economic momentum, reinforcing bets on an August rate cut by the Bank of England.

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An office worker walks by the City of London financial district, in London, Britain, January 17, 2025. REUTERS/Isabel Infantes/File Photo
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Overview

  • ONS data show GDP fell 0.1% in May following a 0.3% drop in April, marking two straight months of contraction.
  • Production output plunged 0.9%, driven by weakness in oil and gas extraction, car manufacturing and pharmaceuticals.
  • Construction activity declined by 0.6%, with only a modest 0.1% gain in services providing limited offset.
  • Despite monthly dips, the economy still grew 0.5% over the three months to May thanks to front-loaded spending earlier in the year.
  • Chancellor Rachel Reeves described the figures as ‘disappointing’, and markets expect a Bank of England rate cut in August due to mounting fiscal pressures.