Jul 13, 2022 04:26AM ET
By: AnalysisWatch
The U.K. economy grew unexpectedly in May, driven by an increase in doctor visits but also by broader demand for things like vacations. That's according to data that could bolster the Bank of England's plans to raise interest rates further.
Economic output grew 0.5% in May, although consumer services fell as rising inflation weighed on shoppers.
A Reuters poll of economists pointed to zero growth in May from April.
The Office for National Statistics said health care services were a major driver of growth, pointing to a "sharp increase in physician appointments."
Freight forwarders also had a busy month, while travel agents did well due to pent-up demand for vacation travel, the ONS said.
The Bank of England had predicted a drop in GDP for the April-June period, but some economists said Wednesday's data suggested that could now be avoided.
Other economists said the May rebound was likely just a blip as countries across Europe struggle to contain inflation from rising energy prices.
GDP rose 0.4% in the three months to May, compared with the Reuters poll forecast of 0.0%, after the ONS said April's contraction was not as sharp as first thought.
The UK's new finance minister, Nadhim Zahawi, welcomed the signs of growth but said there was no room for complacency.
Despite fears that the U.K. could fall into recession later this year, the Bank of England is expected to raise interest rates on Aug. 4 for the sixth time since December, with the only question for investors being the size of the increase. According to the BoE, UK inflation is expected to reach 11% in October.
Sterling rose immediately after Wednesday's data.
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