by Andy Bruce and William Schomberg

LONDON (Reuters) – Britain’s economy contracted less than expected in May, despite strikes and the introduction of a bank holiday to celebrate the coronation of King Charles, suggesting the dreaded recession is not is not yet implemented.

According to data released by the Office for National Statistics (ONS) on Thursday, the UK’s gross domestic product fell 0.1% in May from April, following growth of 0.2% in the month. previous.

Economists polled by Reuters had forecast a contraction of 0.3% in May.

In detail, all sectors of the economy posted a decline, with the exception of services, which remained stable.

After the data was released, the British pound rose slightly against the dollar and was trading at $1.3039 around 09:05 GMT.

Despite the fragility of the British economy, the Bank of England (BoE) should continue to tighten its monetary policy due to persistent inflationary pressures.

Compared to major developed economies, Britain’s recovery from the COVID-19 pandemic still lags behind Germany, which also had a difficult first quarter.

“We feel the underlying business is still growing, but at a snail’s pace,” said Paul Dales, chief UK economist at Capital Economics.

According to this economist, British GDP is expected to grow by around 0.1% in the second quarter, a rate slightly higher than the BoE’s forecast, but the country is likely to experience a mild recession later this year.

Monthly inflation figures, due next Wednesday, will likely provide some evidence for a possible BoE rate hike of 50 bps or 25 bps, added Paul Dales.

UK Finance Minister Jeremy Hunt acknowledged that high inflation continues to hurt the economy and called for patience to bring it down. “Our plan will work, but we have to stick to it,” he said.

While companies in the arts, entertainment and leisure, hotel and catering sector have pointed out that they benefited from the Bank Holiday in May in the UK, indicators show that strikes in the sectors of the health, rail and education weighed on production.

Other ONS data meanwhile showed Britain’s trade deficit widened more than expected to £18.7billion in May as exports to the European Union fell to their lowest point. lowest level since January 2022.

(Reporting Andy Bruce and William Schomberg; written by Kate Holton, Peter Graff and Toby Chopra; Claude Chendjou, editing by Jean-Stéphane Brosse)

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