What's going on?
Three lines on a chart late last week showed British economic growth slowed to a mere 0.8% in May, disappointing pundits.
What does this mean?
Despite strong showings from its soccer teams, the UK’s post-coronavirus recovery lost a little steam in May. Fresh data out on Friday showed the country’s economy grew just 0.8% compared to the month before – barely half what investors were expecting, and a marked slowdown from April’s 2% rate. While relaxed restrictions saw restaurants, hotels, and movie theaters reopening their doors, increases there were outweighed by contractions in the construction and manufacturing sectors – thanks in part to the global microchip shortage dragging down British carmakers.
But it ain’t all bad, guv. The UK economy is now just 3% smaller than it was before the pandemic – and the country’s central bank reckons the difference will have been made up by the end of the year, thanks to plucky Brits spending the savings they accumulated during last year’s lockdowns.
Why should I care?
The bigger picture: They think it’s all over…
With Britain’s economy getting back to winning ways, the Bank of England may soon begin withdrawing some of its antiviral support measures. That’s if nothing derails the recovery – a not insignificant risk, given the fast-spreading Delta variant’s potential to wreak further havoc. Ensuring economic growth continues may yet necessitate further work: just look at China, which decided on Friday to reduce local banks’ cash reserve requirements in order to boost lending and spending.
Zooming out: Out of puff.
At least one British manufacturer got a boost on Friday: medical device maker Vectura accepted a $1.2 billion takeover offer from American-Swiss tobacco firm Philip Morris International. Ironically, Vectura mainly produces the sort of inhalers used by asthma sufferers – a condition that smoking helps trigger. Still, the deal should help Philip Morris towards its goal of $1 billion in annual non-nicotine sales by 2025…