Economy unexpectedly shrinks 0.1% in May

Monthly real gross domestic product (GDP) unexpectedly fell 0.1% in May 2025, following an unrevised fall of 0.3% in April 2025 and growth of 0.4% in March 2025, according to the latest figures from the Office for National Statistics (ONS).

Gross domestic product (GDP) rose by 0.5% in the three months to May 2025, compared with the previous three-month period. Growth was driven mainly by the services sector, which increased by 0.4% over the period. Production and construction rose by 0.2% and 1.2%, respectively.

Monthly services output increased by 0.1% in May after falling 0.3% in April. Production output fell 0.9%, while construction output declined 0.6%. Compared with the same period a year earlier, GDP was up 1.0% in the three months to May and 0.7% higher in May 2025 than in May 2024.

Within services, 10 of the 14 subsectors expanded in May. Information and communication was the largest contributor, growing 2.0%, including a 3.0% rise in computer programming and related services. Professional, scientific and technical activities rose 0.8%, led by legal services, which jumped 6.1% after a sharp fall in April. The ONS noted that changes to Stamp Duty Land Tax (SDLT) in England and Northern Ireland prompted earlier completions, affecting conveyancing demand.

The wholesale and retail trade subsector made the largest negative contribution to monthly services output, falling 1.5%, driven by a 2.7% drop in retail trade, excluding motor vehicles. Output in consumer-facing services fell 1.2% in May, following three months of growth. This was largely due to the fall in retail trade. Travel services and recreation also declined, while accommodation grew 2.4%. Over the three-month period, consumer-facing services rose 0.7%.

Production output decreased by 0.9% in May 2025, following a 0.6% fall in April. The decline was led by a 1.0% drop in manufacturing, with 9 of 13 subsectors falling. Mining and quarrying output fell 3.2%, while utilities saw small gains. The manufacture of pharmaceuticals fell 4.2%, reversing April’s growth. Transport equipment declined 1.3%, and basic metals fell 1.8%.

The largest positive contribution came from a 3.4% increase in machinery and equipment. Over the quarter, production grew by 0.2%, supported by gains in manufacturing and water supply. The manufacture of transport equipment rose 3.0%, despite two consecutive monthly falls in motor vehicle output, which dropped 3.7% in May. The sector remains 15.6% below its February 2024 peak.

Meanwhile, construction output dropped 0.6% in May 2025, ending three months of growth. The decline was driven by a 2.1% fall in repair and maintenance, particularly in non-housing and private housing categories. New work increased by 0.6% in May. Over the three months to May 2025, total construction output rose 1.2%, with infrastructure and non-housing repair work providing the strongest contributions.

Several industries reported that SDLT changes continued to affect activity in May 2025, particularly in legal services, real estate and removals. Exports to the US were also affected by tariff changes, impacting the motor vehicle and wholesale sectors.

ONS director of Economic Statistics Liz McKeown said: “The economy contracted slightly in May with notable falls in production and construction, only partially offset by growth in services. However, across the latest three months as a whole, the economy still grew. This reflected strength earlier in the year that resulted, in part, from some activity being brought forward to February and March.

“May’s fall in production was driven by oil and gas extraction, car manufacturing and the often-erratic pharmaceutical industry. While services grew overall in May with a strong month for legal firms, which recovered from a weak April, and computer programming, these were partially offset by a very weak month for retail sales.”