LONDON (Bloomberg) - The global chip shortage took a toll on the UK economic recovery in May, disrupting manufacturing and sending car and truck production plunging at one of its fastest rates on record.
An unexpected drop in factory output as well as construction meant that growth in the overall economy slowed to 0.8%, about half the rate expected, the Office for National Statistics said Friday. It was slower than April’s gain of 2% when restaurants and stores started to reopen, a figure that also was revised lower.
The semiconductor supply crunch that started last year has cut production in multiple industries, particularly automakers. Earlier this week, Renault SA Chief Executive Officer Luca de Meo warned the effects will be felt through next year. In Britain, export sales were negative for the first time since January, which the ONS said was due to “pressures following the UK’s departure” from the European Union.
“The recovery is losing a little steam as the temporary boost, from the earlier phases of reopening, fades,” said Suren Thiru, head of economics at the British Chambers of Commerce. “Economic activity may remain muted in June as the impact of rising Covid infections and the delay to the end of the roadmap” for dropping restrictions.
Production of transport equipment plunged by 16.4%. Prior to the pandemic, that segment last experienced a fall of that magnitude in January 1974, when strikes by coal miners cut back industry to working three days a week. The ONS said May’s drop was mainly due to a shortage of chips.
Construction output fell 0.8%, the second monthly drop in a row and a sharp contrast with recent surveys suggesting strong growth.