City of London skyline in London, United Kingdom, on June 10, 2024. The City of London is a city, ceremonial county and local government area that encompasses London’s main central business district (CBD). The City of London is also known simply as the City and colloquially as the Square Mile.
Mike Kemp | Photo | Getty Images
LONDON — The British economy grew 0.4% in May, according to flash figures released by the Office for National Statistics on Thursday, sending the British pound soaring to a four-month high against the U.S. dollar after the release.
Gross domestic product (GDP) exceeded the 0.2 percent expansion forecast by economists in a Reuters poll from the previous month.
The UK economy emerged from a mild recession in the first quarter of this year, after Remained stable in April.
The country’s main services sector continued to grow by 0.3% in May, as output in both manufacturing and construction recovered from declines, rising by 0.2% and 1.9%, respectively.
The pound rose 0.14% against the U.S. dollar to $1.2863 as of 8:30 a.m. London time, according to LSEG data, the highest level for the British currency since March 8, 2024.
The broad recovery The newly elected Labour PartyIt’s Prime Minister Keir Starmer’s first week in office.
Goldman Sachs last week Growth forecasts revised upwards Following the landslide victory of the centre-left Labour Party in the UK general election, the party campaigned on the following platform: Promoting economic growth, housing and planning.
The party’s parliamentary majority and business-friendly message have led analysts to describe the government as: Generally supportive of UK assets.
Ashley Webb, UK economist at Capital Economics, stressed in a note that apart from the lack of growth in April, the trend in UK GDP growth in recent months “supports the idea that the dual drag on economic activity from rising interest rates and rising inflation is starting to fade.”
UK inflation is set to slow from a 41-year high of 11.1% in October 2022. Down to Bank of England’s 2% target The results, published in May this year, have raised hopes of future interest rate cuts by the Bank of England.
However, the BOE continues to speak in a careful tone Even after the European Central Bank launched its own policy, at its June meeting The path to lowering interest ratesHe warned that a key indicator of the persistence of UK inflation “remains elevated.” Markets are roughly split on prospects for a rate cut at the August meeting.
Muniya Barua, deputy chief executive of industry campaign group Business LDN, said in emailed comments that it was up to the new government to back the latest economic growth figures.
“With public finances under strain, ministers should follow a series of recent growth-boosting packages and prioritise high-impact, low-cost measures which, taken together, could stimulate much-needed private investment,” Baruah said, citing measures such as overhauling apprenticeships and scrapping stamp duty on share transactions.
Last week, new Chancellor of the Exchequer Rachel Reeves The Labor Party He proposed mandatory house-building targets, lifting a ban on new onshore wind farms in England and reforming planning rules, and on Wednesday announced the launch of a 7.3 billion pound ($9.4 billion) sovereign wealth fund aimed at attracting private investment in Britain’s infrastructure projects.
Lindsay James, investment strategist at Quilter Investors, said in a note that the business community is now awaiting Labor’s first financial report, which is expected to be released no earlier than mid-September.
“This should provide greater clarity on both taxation and spending plans, which will allow businesses to plan better and in turn could reignite investment enthusiasm,” James said.
“But this will take time to sink in and GDP growth is unlikely to accelerate significantly until we have a better understanding of what’s coming next,” she added.
