The UK economy grew just 0.8% in May as manufacturing troubles caused the rebound to lose steam



Nissan car factory UK
UK car production plunged in May, official data showed.

The UK economy grew 0.8% in May compared with April, much slower than economists had expected.
Car production was hit hard by a global microchip shortage, official figures showed on Friday.
Economies are contending with bottlenecks as demand surges with reopening of activity.
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The UK economy undershot expectations to grow 0.8% in May, as bottlenecks in the manufacturing sector offset rapid growth in the hospitality industry, official data showed on Friday.

That month-on-month growth in gross domestic product was well below the 1.7% uptick economists had been expecting. It compares with a 2% rise in April, revised down Friday from 2.3%. Overall, UK GDP was 3.1% smaller than before the pandemic in February 2020.

The manufacturing sector badly underperformed in May, contracting 0.1%, the UK's Office for National Statistics said. Analysts were expecting strong growth in the sector.

Transport equipment manufacturing suffered the most, falling 16.5% in May compared with April as global microchip shortages disrupted car production. The decline is a clear indication of the impact that supply-chain bottlenecks are having on economies.

However, growth of 0.9% in the services sector helped the UK economy expand overall. Accommodation and food service activities were up 37.1%, as restaurants and pubs welcomed customers back indoors after the government eased COVID restrictions further.

Read more: The chip shortage has left US car buyers scouring empty dealerships. That won't change anytime soon.

The pound was down 0.05% after the data was released, at $1.377. The UK's FTSE 100 was up 0.54% after a sharp fall on Thursday.

The UK government has had to delay the final stage of unlocking pandemic restriction, as a result of a sharp rise in coronavirus cases driven by the delta variant. But it is set to end almost all restrictions on July 19, in the hope that vaccinations will keep hospitalizations low.

"It's great to see people back out and about thanks to the success of the vaccine rollout, and to see that reflected in today's figures for economic growth," said UK Chancellor Rishi Sunak. He added that the government was keeping up its support through the furlough wage-subsidy scheme.

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said: "May's weaker-than-expected increase in GDP underlines that the recovery to its pre-COVID levels will be drawn out."

He added: "Growth in GDP likely will slow further over the summer… This probably partly reflects the fading of some initial enthusiasm when businesses reopened. Rising COVID-19 infections also appear to be prompting some people to work from home again and to visit shops and services venues less frequently."

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