UK economy defies expectations to grow 0.5pc

Good morning. 

We start the day with some unexpectedly upbeat figures showing the UK economy grew by more than forecast in May.

GDP rose 0.5pc in May, according to the ONS. That’s a sharp improvement on April’s 0.2pc fall, which was revised up from 0.3pc previously.

The growth comes despite inflation surging to a 40-year high in May amid surging energy costs driven by Russia’s war in Ukraine.

Motorists have been paying record prices at the pumps and household budgets are being squeezed in the biggest drop in living standards in a generation.

But the surprise jump in GDP defies expectations of a contraction in the second quarter and will calm fears that Britain will be tipped into a recession later in the year.

5 things to start your day 

1) Europe faces ageing population nightmare in ‘absolute collapse’  As populations shrink, nations are left to cope with the economic strain 

2) Families £8,800 worse off due to ‘toxic combination’ at heart of economy  Poorest French households £3,800 better off than British counterparts, data reveals

3) Churchill’s tailor Gieves & Hawkes up for sale  Retailer also dressed Lord Nelson for the Battle of Trafalgar and the British royal family 

4) High interest rates are temporary, says Andrew Bailey  Bank of England Governor hints at eventual return to ‘low global’ rates

5) Putin raids prisons for soldiers after massive losses in Ukraine  Kremlin also recruiting heavily from poorest parts of Russia, say Western officials

What happened overnight 

Hong Kong stocks were slightly higher this morning after two days of big losses.

The Hang Seng Index added 0.3pc, the Shanghai Composite Index dropped 0.06pc, while the Shenzhen Composite Index on China’s second exchange barely moved.

Tokyo stocks opened higher, with the benchmark Nikkei 225 index up 0.5pc in early trade and the broader Topix index rising 0.4pc.

Coming up today

• Economics: GDP (UK), manufacturing production (UK), industrial production (UK, EU), consumer price index (US), RICS house price balance (UK), trade balance (China)
• Corporate: PageGroup (interim results); JD Wetherspoon, Tullow Oil (trading update)