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A drop in manufacturing and construction output in May suggest that the economy has struggled to gain strength after a weak start to the year, lowering the chances of the Bank of England deciding to raise interest rates this year.

United Kingdom industrial production and construction output dropped unexpectedly in May, weighing on the economic growth for the second quarter.

Wider UK industrial output also unexpectedly contracted by 0.1pc in May after a 0.2pc rise in April, and against expectations for a 0.4pc increase.

Construction output dropped more than expected too, falling by 1.2% in May from April. In the first three months of 2017, the British economy grew by a muted quarterly rate of 0.2 percent, the lowest of all Group of Seven industrial economies, largely because higher inflation and Brexit uncertainties kept a lid on consumer spending. The combination of the two sent the pound 0.4 per cent lower against the dollar, to $1.2919.

The last four monthly releases have all been weaker than consensus forecasts.

Holger Zschaepitz 
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Howard Archer, chief economic advisor to the EY ITEM Club, said it was "virtually certain" that construction and manufacturing dragged down economic growth in the second quarter.

"And though an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3% with the risks to that projection skewed to the downside".

Economists said the figures suggest any rebound in growth from the first quarter will be muted and could delay an interest rate hike by the Bank of England, which is increasingly anxious about import price increases stoked by the pound's sharp fall in value since last year's Brexit vote.

Industrial output in the eurozone's second-largest economy rose 1.9% on the month in May. On a yearly basis, construction output slid 0.3%.

The total trade deficit widened by £2.0 billion to £8.9 billion in the 3 months to May, driven by large increase in imports in March and then a further increase in May. A decrease in services exports also contributed to the fall.


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