Key facts
- UK economy expected to stall in May with a 0.1% GDP decline forecast.
- The ongoing Iran war is cited as a primary cause for slowing growth and rising energy costs.
- April saw a 0.1% contraction in GDP, primarily driven by the services sector.
- Food inflation may rise by up to 10% later this year due to the conflict's impact.
- Some sectors, like energy supply, are benefiting from higher oil prices.
The UK economy is projected to stagnate for another month in May, with economists forecasting a 0.1% contraction in GDP. This slowdown is attributed to the ongoing conflict between the US and Iran, which has driven up fuel and energy costs and created global economic turbulence.
April's GDP already saw a 0.1% dip, marking a reversal from the growth seen in February and March. The services sector, the largest contributor to the UK economy, led this decline, although the construction and manufacturing industries provided some offsetting growth. The continued impact of the Iran war is expected to affect various sectors, with potential for significant increases in food prices later in the year.
While some analysts, like those at Pantheon Macroeconomics, predict no growth for May due to sluggishness in services, others, such as Deutsche Bank, foresee a 0.1% decline. Deutsche Bank's chief UK economist, Sanjay Raja, noted that while services like information, professional, and financial services remained weak, there were anecdotal positives for retailers from promotions and warmer weather. He also suggested that England's progress in the World Cup could provide a boost to pubs and bars.