UK economy perks up slightly

LONDON, July 10 (Reuters): Britain's economy picked up a bit of speed in May after slowing in early 2018, according to official figures.

A new monthly reading of gross domestic product (GDP) showed the world's fifth-biggest economy grew by 0.3 per cent in May from April.

That was up from growth of 0.2 per cent in April.

The reading was in line with the forecast in a Reuters poll of economists, marking the strongest growth since November, the Office for National Statistics said on Tuesday.

The May figures are likely to give the Bank of England (BoE) more confidence about raising interest rates next month.

Sterling fell against the dollar after the data, which showed a mixed picture of the economy.

Growth came mostly from the dominant services sector while factory output disappointed.

But Cathal Kennedy, an economist at RBC Capital Markets, said the figures should support expectations that the BoE would raise rates in August.

"The gradual momentum into May really backs up what the Bank has been saying of late. We have seen a bounceback from the first quarter," he said.

BoE Governor Mark Carney and other top officials at the central bank opted not to raise rates in May because of the early 2018 slowdown.

Instead, they decided to wait for signs the weakness was temporary.

They will also wait for signs that it was caused by unusually cold winter weather rather than a sign of broader problems before Britain's exit from the EU.

Britain is set to leave the European Union next year.

However, upheaval in the government of Prime Minister Theresa May could yet affect confidence among employers, a potential new hurdle for the BoE.

May's government is battling to keep her grip on the ruling Conservative Party which is split over Brexit.

Britain' economy grew by 0.2 per cent in the three months to May, as expected, after stagnating in the three months to April.

In annual terms, the economy was 1.5 per cent bigger than in May last year, the ONS said.

The BoE's rate-setting committee is expected to raise rates by 25 basis points to 0.75 per cent on August 2, according to a Reuters poll of economists.

It will be only the second rate increase by the BoE in more than a decade.