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LONDON: Britain’s post-lockdown economic rebound slowed sharply in May despite a relaxation of social-distancing rules, according to official data which also showed a hit to carmakers from the global shortage of microchips.

Gross domestic product expanded by a monthly 0.8%, much faster than its typical pre-pandemic pace but down from April’s 2.0% surge. It was also a lot weaker than the median forecast of 1.5% in a Reuters poll of economists.

“Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon,” Paul Dales, an economist with Capital Economics, said.

Britain suffered one of the biggest hits from the pandemic among advanced economies last year and GDP in May was 3.1% below its level in February 2020 just before the pandemic struck.

The Bank of England expects Britain’s economy to grow by 7.25% this year, the fastest since 1941. Last year output plunged by almost 10%, the biggest drop in more than 300 years.

April saw the easing of restrictions for many retailers, hairdressers, and pubs and restaurants that could serve customers outside. In May, hospitality firms were allowed to resume indoor service.

Britain’s dominant services sector grew by a weaker-than-expected 0.9% in May from April as a huge 37.1% monthly jump for accommodation and food services failed to offset slower increases elsewhere in the sector.

Supermarket sales fell as more people ate out, and education output dropped due to a decline in school attendance. Reduced Covid-19 testing also weighed on GDP.

Industrial output grew by 0.8% but manufacturing shrank narrowly. The chip shortage affecting carmakers led to the biggest fall in their output since April 2020.

Data published earlier this week showed Germany’s industrial output fell in May as semiconductor bottlenecks also contributed to a recovery slowdown in Europe’s largest economy.

Bank of England Governor Andrew Bailey, taking part in discussions with his Group of 20 peers, said the world needed “robust openness to prevent the breakup of supply chains, which we are seeing threats to” in data from Britain and beyond.

“I think the G20 is in the front line here in reinforcing the importance of openness in a multilateral context,” he said.

Output in Britain’s construction industry contracted by 0.8% from April, hit by the fourth-rainiest May since 1862. Dales at Capital Economics said the fall could also reflect shortages of materials and labour.

Prime Minister Boris Johnson plans to lift most of the remaining restrictions from a third lockdown on July 19.

Rory MacQueen, an economist at the National Institute of Economic and Social Research, a think-tank, said the decision could yet backfire.

“It remains to be seen whether the lifting of further restrictions in July contributes to a continuation of strong growth in the third quarter or - if cases of Covid-19 continue to rise - increased caution among consumers and even another national lockdown,” he said.

Cases of the Delta variant of the coronavirus have accelerated in recent weeks but private-sector data and surveys have suggested no major hit to hiring or consumer behaviour.

The ONS revised down its figure for growth in April to 2.0% from 2.3% - reflecting a reduced contribution from Covid testing - although the estimate for March was increased.

Compared with May last year, when the country was in its first coronavirus lockdown, GDP was up by nearly 25%.

Separate data showed British imports and exports with the European Union continued to recover after a slump in January when the country finally left the bloc’s single market. But they remained below trade volumes with the rest of the world.


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