“This dishearteningly weak rebound is unlikely to ease anxiety over the UK’s economic health as the Iran conflict helped suppress activity in key sectors like construction and industrial production, despite a warm weather uplift to retail.
“May’s uptick is unlikely to have prevented GDP growth stagnating across Q2, with the intensifying squeeze on incomes from elevated energy costs likely to have suffocated June activity, even with the World Cup boost to retail and hospitality.
“This underwhelming outturn highlights the UK’s vulnerability to a prolonged re escalation of US–Iran hostilities, as a sustained spike in oil prices would further damage an already frail economy, strengthening stagflation risks and eroding the incoming Prime Minister’s fiscal headroom.
“The imminent change in Prime Minister risks casting a shadow over the UK economy, with heightened uncertainty over future tax policy likely to make consumers and businesses more reluctant to spend and invest.
“May’s GDP figures make a July rate rise less likely, by giving policymakers hope that a faltering economy can help contain the inflationary pressures reignited by the renewed US–Iran hostilities enough to justify holding off tightening policy.”
ENDS
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