UK economy rebounds despite soaring inflation

LONDON

Britain’s economy rebounded in May, official data showed yesterday, dampening fears of a slowdown despite surging inflation and rising interest rates.    

Gross domestic product expanded 0.5 percent, the Office for National Statistics said in a statement, beating expectations of zero growth.    

“The economy rebounded in May with growth across all main sectors,” said Darren Morgan, ONS director for economic statistics.    

The broad rebound was driven by a bounceback in construction, manufacturing and services.    

That followed a 0.2-percent decline in April, which was revised up from a 0.3-percent contraction.    

“There was widespread growth across manufacturing after several tough months while construction also fared well with housebuilding and office refurbishment driving growth,” Morgan said. 

The Bank of England has hiked interest rates five times since December in a bid to tame runaway inflation, which has sparked a cost-of-living crisis in Britain.    

U.K. inflation spiked in May to a 40-year peak of 9.1 percent, a level set to hit double figures this year on soaring energy and food prices according to the BoE.    

Capital Economics analyst Paul Dales said the economy was “resilient” but warned over the ongoing risk of recession due to rampant price rises.            

“It is far too soon to conclude that the economy will be able to get through this period of unusually high inflation largely unscathed,” Dales said.    

“With real household disposable incomes set to fall further in the third quarter, a recession is still a real risk. That may mean the economy proves to be a poisoned chalice for whoever wins the race to be the next Prime Minister.”