Jeremy Hunt blames ‘drag anchor’ of spiking inflation as UK slips into the red with GDP down 0.1% in May – but defies fears of an even worse fall

Jeremy Hunt blamed the ‘drag anchor’ of inflation today after the UK economy slipped into the red. 

Official figures showed GDP dipped 0.1 per cent in May, meaning that activity effectively flatlined over the past three months.

Although the fall was not as bad as analysts had anticipated, it underlines the threat of ‘Stagflation’ – rising prices and no growth. 

Mr Hunt insisted that the extra Bank Holiday for the Coronation held the numbers down. 

But he warned that ‘high inflation remains a drag anchor on economic growth’. 

‘The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it,’ he said. 

Official figures showed GDP dipped 0.1 per cent in May, meaning that activity effectively flatlined over the past three months

Director of Economic Statistics Darren Morgan said: ‘GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal. 

‘Meanwhile, despite the Coronation Bank Holiday, pubs and bars saw sales fall after a strong April. 

‘Employment agencies also saw another poor month. ‘However, services were flat overall with health recovering, with less impact from strikes than in the previous month, and IT also had a strong month. 

‘Across the last three months as a whole the economy showed no growth.’ 

Suren Thiru, Economics Director at ICAEW, said: ‘This data confirms that the economy was floundering even before the impact of recent interest rate rises are fully felt as the extra bank holiday for the Coronation curbed output in May.

‘While the economy may rebound in June, the significant squeeze on activity from high inflation, stealth tax hikes and rising interest rates means the Prime Minister may struggle to meet his pledge to get the economy growing.

‘These GDP figures are unlikely to prevent another rate rise in August. However, given the long time lag between rate rises and its effect on the real economy, tightening further risks damaging our growth prospects by overcorrecting for past errors.’

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