The UK economy shrank by 0.1% in May as the extra bank holiday for the King’s Coronation took a bite out of national output.
The slip followed growth of 0.2% in April, the Office for National Statistics (ONS) said.
Activity in the manufacturing, energy and construction sectors fell in May, as some industries were hit by there being one fewer working day than normal.
Pubs and bars also saw sales fall after a strong April, despite the three bank holidays providing consumers with more leisure time.
Ben Jones, CBI lead economist: “A contraction in May was widely expected given the additional bank holiday and June’s data will likely be flattered by a return to the usual number of working days.
“Cutting through the noise, our business surveys suggest that activity in the private sector has remained firm in recent months, despite persistent cost pressures, rising borrowing costs and a still tight labour market.”
David Bharier, head of research at the BCC, said: “Today’s GDP figure showing 0% growth in the three months to May provides further evidence of the precarious state of the UK economy. While businesses have been incredibly resilient in stomaching multiple waves of economic crises, our latest Quarterly Economic Survey shows that most firms are still not reporting improved business conditions.”
Cooler US factory prices were reported, strengthening the case for the Federal Reserve to pause its rate hike. The FTSE 100 index closed up 0.3% at 7,440.21 points, recording a 2.5% increase for the week so far, driven by the subdued US inflation figures.
Housebuilders faced declines as Barratt Developments predicted a significant drop in home completions for the next year.
Barratt said the order book for 2024 is about half of last year and adjusted profit before tax is anticipated to be in line with current market expectations.
In an update it said there had been a “significant deterioration in demand during the second quarter and, whilst the position improved during the third quarter, reservations then slowed more than normal seasonal trends from mid-May to the end of June 2023.”
David Thomas, chief executive, commented: “Whilst the trading backdrop has become more challenging in recent months, with many of our customers facing significant cost of living pressures, we have responded decisively – increasing our reservations into the private rental sector, using incentives for customers in a disciplined way, and flexing our build activity, land-buying and operating costs to reflect market conditions.
“As a result, we enter the new financial year in a robust financial position with a solid forward order book and we are ready to respond to any further changes in the housing market.”
Barratt’s shares fell by 1.5%, while Taylor Wimpey and Berkeley Group saw negative impacts with declines of 2.1% and 1.0% respectively.
Wood making progress
Wood Group shares were unchanged after CEO Ken Gilmartin said “good progress” is being made as the board unveiled a 15% rise in half-year revenue to c.$2.9 billion.
Watches of Switzerland
Group sales at upmarket retailer Watches of Switzerland increased by 19% at constant currencies to reach £1.54bn, helped by an especially strong showing in the US.
That drove a 23% jump in statutory profits before tax to £155m, while free cash flow strengthened 30% to £146m.
The watchmaker also reiterated its guidance for its 2024 financial year, voicing confidence in the outlook for organic growth, even as it continued “to actively pursue additional inorganic growth opportunities to enhance that growth.”
Drinks group C&C said its branded business has had an encouraging performance in the early months of the year, building on growth achieved in FY2023, with net sales revenue of its branded business up 10% in the four months to the end of June.
Core brands, principally Tennent’s and Bulmers were up 9% in the same period, with each brand continuing to grow category share.