CBI comments on latest GDP data for May

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.

"Looking ahead to the coming months, strong wage growth and slowing headline inflation should ease the drag on household incomes. But the Bank of England doesn’t sound like it’s ready to throw in the towel on inflation and the chances of further interest rates hikes have risen, which will hit cash-flow for households and businesses. Given these countervailing trends, growth is likely to remain fairly sluggish in the second half of the year."