Freight lorries queue to enter the Port of Dover on the A20 road outside of Dover, Britain, April 27, 2022.
Freight lorries queue to enter the Port of Dover on the A20 road outside of Dover, Britain, April 27, 2022. Reuters / HENRY NICHOLLS

Britain's economy grew unexpectedly in May, driven by a rise in doctor appointments and demand for holidays, according to official figures that could reassure the Bank of England about its plans to keep on raising interest rates.

Economic output expanded by 0.5% in May, the Office for National Statistics said on Wednesday.

A Reuters poll of economists had pointed to zero growth in May from April.

Health services were a major driver of growth, the ONS said, citing "a large rise in GP appointments".

Road hauliers also had a busy month, while travel agencies fared well with pent-up demand for holidays, the ONS said.

Over the three months to May, GDP was up by 0.4%, compared with the Reuters poll forecast of 0.0%.

The Bank of England has predicted that GDP will contract in the April-June period but some economists said Wednesday's data suggested that might now be avoided.

"It won't require much for quarterly Q2 growth to now be positive as a whole," analysts at RBC Capital Markets said.

Other economists said May's upturn was likely to represent a blip with countries all over Europe struggling to contain inflation driven by soaring energy prices.

"It is too early to break out the champagne, as the details in the release still point to an economy under pressure as the cost-of-living crisis squeezes households' ability to spend," UBS economist Dean Turner said.

Britain's new finance minister, Nadhim Zahawi, welcomed the signs of growth but said there was no room for complacency.

"We're working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK," he said in a statement.

Despite concerns that Britain could fall into a recession later this year, the BoE is expected to raise interest rates for the sixth time since December on Aug. 4 with the only question for investors relating to the size of the hike.

Sterling rose after Wednesday's data.

Most of the candidates to replace Boris Johnson as prime minister, including Zahawi, say they will cut taxes to get the economy growing again. Former finance minister Rishi Sunak, who is also in the race, says he wants to control inflation first.

The ONS revised its estimate of GDP growth in April to show a fall of 0.2% on the month, a slightly smaller drop than originally thought.

Consumer-facing services fell by 0.1% in May from April as inflation accelerated and workers faced a tax increase that was introduced in April. The drop contrasted with April's 2.2% rise.

(Reporting William Schomberg; editing by William James and Andrew Heavens)