ECONOMY SHRINKS AS CORONATION HITS CONSTRUCTION AND FINANCE
GIVING workers a day off for the Coronation helped to shrink the economy in May, according to official figures.
Gross domestic product declined by 0.1 per cent for the month, after increasing by 0.2 per cent in April, the Office for National Statistics said.
The contraction was driven by the extra bank holiday weekend for the royal occasion, meaning sectors like construction and finance lost a working day.
Analysts had been expecting the economy to shrink slightly more. Deutsche Bank thought the monthly GDP decline would be 0.3 per cent, while Investec Economics predicted 0.5.
But the pound surged to £1.30 against the US dollar, a 15-month high, following the better than expected data.
The economy had been boosted in April as Britons spent more in pubs, bars and shops. But the accommodation and food services sector acted as a drag on growth in May, falling by 0.9 per cent after a 2.1 per cent bounce the previous month.
Some hotels, pubs and restaurants said they were boosted by the extra bank holiday while others reported having fewer visitors, as the rainy weather led some people to stay at home.
There was a significant 3.5 per cent drop in employment activities during the month, with signs there was less demand for recruitment services as job vacancies continue to fall.
The services sector as a whole showed no growth, with falls for hospitality, employment and retail offset by growth for the health and social work sector and the arts and entertainment industry. Darren Morgan, director for economic statistics at the ONS, said: “GDP fell slightly as manufacturing, energy generation and construction all fell back, with some industries impacted by one fewer working day than normal. Despite the Coronation bank holiday, pubs and bars saw sales fall after a strong April. “Employment agencies also saw another poor month. “However, services were flat overall with health recovering, with less impact from strikes than the previous month.” The economy would need to contract again in June for there to be an overall decline across the second quarter.