Economy Contracting at Rapid Pace
 

Main Points

• The ONS preliminary estimates suggest that growth declined by 2.0 per cent in the first quarter of 2020, broadly consistent with what we suggested it could be last month (figure1.)
• The substantive contraction in growth reflects negative contributions across all the headline sectors.
• Output declined by 5.8 per cent in March itself, mainly due to record falls in construction and services.
• The latest ONS estimates are preliminary and largely uncertain but continues to suggest GDP is around 25 per cent smaller when the lockdown is in place.
• In light of the preliminary release, we forecast growth in the second quarter to decline sharply by about 25 to 30 per cent.

“In a period of radical uncertainty, the short-term economic impact of Covid-19 is becoming clearer with the publication of GDP data for March, where output is expected to be lower by about 25 per cent in months when the lockdown is in place.  Restarting the economy by promoting activities in upstream sectors such as construction, some manufacturing and the government will increase overall activities via helpful spillovers. But without a vaccine, there is significant risk of a second wave which could trigger a further setback in the economy.”

Dr Kemar Whyte
Senior Economist - Macroeconomic Modelling and Forecasting

View the full commentary here.