The latest data from the ONS confirm, the economy grew by 15.5% in the third quarter, compared to Q2. Year on year, GDP was down by 10%, compared to prior year.
The pattern of recovery is more or less as expected. We have talked in our recent broadcasts of a recovery by halves. An economy down by 20% in the second quarter, down by 10% in the third quarter, then down by 5% in the final quarter of he year.
For the year as a whole, output will be down by 10% in 2020, with a significant recovery in prospect for next year. Manufacturing and construction performed marginally better than we expected. Manufacturing output was down by 9% compared to prior year. Construction was down by 12.5%.
Sectors most badly hit, were accommodation and food, down almost 30%. The arts and entertainment sector was down by 25%. In travel, data from the Civil Aviation Authority, reports passenger numbers in UK terminals were down by 80% in the third quarter. Of itself, this is a considerable improvement on the 98% drop in Q2. No wonder then, Manchester airport is consolidating all activity into just one terminal, for the foreseeable future.
The latest jobs data reported an increase in unemployment to 1.5 million in the period to September. The unemployment rate increased to 4.8%. The level of redundancies, increased to over 300,000 in the quarter. The claimant count held steady at around 2.6 million.
So what happens next? Fear for tiers were swept away, by the decision to move into national lock down this month. The misery for many will continue. Hotels, bars, restaurants, pubs, non essential retail will suffer. Cinemas, theaters, sports and events will continue to feel the pain. Brakes on again, in the motor industry, registrations will be down by almost 40% this year.
Beneficiaries will continue to be, on line retail and logistics. Food delivery and last mile challenges will continue. Health and welfare will feature in continued uplift in activity.
The Bank of England has reduced GDP forecasts for the year, to a drop of 11.5%. It may not be so bad. The Chancellor has back tracked on the furlough scheme, extending support to the end of March next year. The peak in unemployment at between 2.5 to 3.0 million will be pushed back to Easter next year as a result.
Government borrowing may increase towards £400 billion in the process. The Chancellor has the trillion pound bank note in his back pocket to ease the pain ... as we discussed in full last week ...
The Saturday Economist
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