United Kingdom: GDP contracts at sharpest pace on record in April
GDP slid 20.4% month-on-month in seasonally-adjusted terms in April (March: -5.8% mom). April’s reading marked the worst result on record and was driven by declines in industry, services and construction as the UK went into lockdown from late March. On a rolling quarterly basis, GDP fell at a quicker rate of 10.4% in the three months to April (three months to March: -2.0% ).
April’s reading was likely the low water mark of economic activity. PMI data suggests a softer contraction in May, and non-essential shops will reopen from 15 June in England, which should support domestic activity. Moreover, similar easing measures abroad will breathe life into the external sector. That said, the recovery will be gradual, and a large contraction is forecast for 2020 as a whole.
According to Berenberg: “the key risk to the outlook remains a potential second wave of the virus that requires nationwide lockdowns to contain it. Learning to live with the virus will remain a major challenge until better medicine becomes available. However, the UK faces the additional risk from the ongoing UK-EU negotiations about their future relationship. Negotiators seem to be stuck at an impasse and are far apart on key issues such as governance, level-playing-field rules, fishing and, critically, the Northern Irish border.”