The UK economy shrank less than expected in May after an additional holiday to mark the coronation of King Charles III weighed on activity.
Gross domestic product fell 0.1% in May after an 0.2% gain the month before, the Office for National Statistics said Thursday. Economists had expected a drop of 0.3%.
The figures continue a series of upward surprises for the UK, which avoided a recession that forecasters including the Bank of England and International Monetary Fund had expected to set in earlier this year. It will revive the focus on soaring inflation and the central bank’s efforts to cool the economy with sharp increases in borrowing costs.
Economists are reluctant to read too much into the month’s figures since May had an extra bank holiday for the king on top of the usual two. The figures also leave the UK with no growth over the last three months, with even optimists predicting sputtering gains and stagnation.
They’ll keep a close eye on June’s data, noting a strong rebound might indicate underlying strength in activity, while a lackluster reading may hint a prolonged downturn has begun.
May marks the third month in a year that royal events have weighed on growth. Queen Elizabeth II’s funeral contributed and a public holiday to celebrate her Platinum Jubilee shaved 0.7% off output both in September and June last year.
But analysis suggests the impact of these events is declining, and the blow from business closures over the May coronation holiday was offset by heavy spending on tourism and hospitality as Britons flocked to pubs toast their new monarch.
Volatility in the monthly data — and occasional contractions — isn’t unusual even when the economy is strong. The ONS reported contractions in two of the six months from October 2022 and March 2023 even though numbers for the full quarter were positive. That bucked the forecasts the Bank of England made in November for one of the longest recessions on record.
