The UK’s recovery from the coronavirus crisis has started off slower than economists were predicting, new figures from the Office for National Statistics (ONS) released today (14 July) show.
GDP increased by 1.8% in May, less than the 5.5% growth forecast by City economists and despite lockdown measures beginning to be eased throughout the month.
The economy shrank by 2.2% in Q1 – the worst quarterly contraction in 40 years – and the UK is certain to fall into recession once Q2 figures are released next month, having seen GDP plummet by a fifth in April.
The treasury’s own forecaster has predicted that the economy may not recover till the end of 2022, the Guardian report.
Trade hit
HMRC figures released today for UK exports and imports also showed that trade continues to be impacted by the global crisis.
Goods exports for May decreased by £2bn (8.2%) compared with April to £21.9bn, representing a 30% annual decrease compared to May 2019.
Imports of goods were less severely impacted month-on-month, falling 0.4% to £29.7bn, but this is still down 28% on May 2019, representing an £11.3bn downturn.
US downturn
The impact of ongoing lockdowns in the UK’s major partner countries is having a particular impact.
The US – the UK’s largest export destination – experienced the second largest value decrease on a month-by-month basis (-11%) and the largest annual decrease (37%).
Neighbouring France, however, saw an increase of 19% for value in exports from April to May.
Services contract
Travel restrictions meant the recovery in services did not materialise, with professional services suffering the worst sector decline at -3.8% month-on-month.
The biggest monthly increases were in wholesale and retail (12.9%), manufacturing (8.4%) and construction (8.2%).
V-shape recovery
An uplift in consumer spending on DIY and household goods in May led to hopes of a ‘V-shape’ recovery, with Bank of England chief economist Andy Haldane predicting a quick rebound.
Following the ONS figures today, Jeremy Thomson-Cook, a chief economist at financial services provider Equals PLC, told the Guardian it could take months for ‘normality’ to return.
“May’s run of GDP, industrial production and services sector activity confirms that it’s easier to fall down a lift shaft than walk up a flight of stairs and the ongoing economic recovery will need many more months before any vague sense of normality is restored,” he said.
The Chancellor Rishi Sunak said the figures “underline the scale of the challenge we face”.
Sterling was down almost half a cent against the dollar following the release of the figures to around $1.241. It also slid a third of a eurocent to €1.1037.
