July 2020 GDP Tracker

Slow recovery from 20 per cent output contraction

Main points

• The UK economy remains on course to decline by 20 to 25 per cent in the second quarter of 2020.
• According to the ONS estimate published this morning, the UK economy contracted by 19.1 per cent in the three months to May, broadly in line with what we forecast last month (figure 1). The contraction in growth reflects widespread negative contributions across all major sectors.
• The economy grew by 1.8 per cent in May itself but output remained 25 per cent below its February level.
• The initial outlook for the third quarter of 2020 is for growth of about 8 to 10 per cent.

“The latest ONS estimates suggest that GDP grew by 1.8 per cent in May as the economy started to reopen. However, GDP in May was 25 per cent smaller than in February before lockdown measures were implemented, and we are doubtful about a V-shaped recovery. The loosening of Covid-19 restrictions has provided an impetus to kickstart the UK economy. However, the measures unveiled by the Chancellor at the Summer Statement are a poorly timed change of tack and could trigger a sharp rise in unemployment, and possibly lead to permanent long-term damage to the economy.”

Dr Kemar Whyte
Senior Economist - Macroeconomic Modelling and Forecasting