Output in the UK economy fell by 20% in April compared to prior month. Compared to prior year, total output fell by 24.5%. One quarter of output was lost to lock-down, as the Covid crisis hit.
Almost nine million jobs would have been at risk, without the government furlough scheme. Manufacturing output fell by almost 30%. Construction output fell by 44%. The leisure sector, including accommodation and food fell by 92%.
Within the service sector, retail business fell by 34%. Transport and Storage by 39%. Professional services fell by almost 20%. Arts and entertainment dropped by almost 50%. Education and healthcare did not escape the epidemic. The only sector to remain unscathed was public sector administration and defense spending, rising by a modest 1.4%.
In our monthly ZOOM webinar updates we have been warning of a shock to output in the second quarter of around 21%. The April fall is expected to be the nadir of the setback and shutdown. In May, construction activity increased in the month, manufacturing businesses were encouraged to return to work.
Next week, all retail businesses will be allowed to open. Boris Johnson is encouraging households to get out and shop. The Prime Minister is planning to visit a high street this week. He hopes to reassure shoppers it is safe to leave their homes and splash the cash. Yes get out and spend, the R(0) is less than one.
Fast food stores are reopening, vegan sausage rolls will once again be available from Greggs. The shock to output is likely to mitigate in the months ahead. Output in Q2 may well be down by 22% but our sector model suggests the drop in Q3 and will be around 12.5% and in the final quarter of the year, down by 6%.
For the year as a whole, we expect the economy to fall by 10% with a similar bounce back in 2021. Without an extension of the job protection scheme to the end of the year, the number of people out of work will rise to over 3 million, a rate of almost 10%. It seems likely the Treasury will shell out for the remainder of the year but not just yet. For now, the priority is to get Britain back to work. Some may not make it, as the job data next week will suggest.
It is time to quarantine the scientific advisers and clampdown on statements from the dissidents within the group. Who would have thought it would be possible to produce R(0) values to two decimal places on a regional and daily basis? It isn't of course. The data presents the highlight of spurious accuracy, a process in which numerical data is presented in a manner which implies a higher level of precision than is actually the case.
We have always claimed, applying mediaeval measures of containment to a contemporary economy, will drive us all back to the dark ages. The travel quarantine scheme will have to be ditched. Social distancing rules will be brought into line with the international guidelines. People have been scared out of the wits and into their homes. They must be persuaded to return to the light. The all clear sirens are sounding, most people cannot hear it yet ...
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Fed Forecasts Slow Recovery ...
Jerome Powell, Chairman of the Federal Reserve, released the latest forecasts for the U.S. economy this week. GDP is expected to drop by 6.5% this year. The unemployment rate is expected to be 9.5% by the end of the year.
The recovery will be slow but V shaped. The economy will bounce back in 2021 by 5%. Job gains will mitigate the unemployment rate to 6.5%. The recovery will continue into 2022 with further growth of 3.5% and a "u" rate of around 5.5%.
The recovery may not be enough to save the Trump administration. Joe Biden is leading the polls by 14 points. The President's approval rating is down at 38%. Clinton and Bush were in similar territory. A one term tag, awaits. Trump is desperate to return to the rallies and campaign trail. Florida will be the home of the next Republican convention. The viral risk was to great for North Carolina.
Anthony Fauci has warned of the dangers of political rallies as the epidemic continues to move across the USA. The President talks of the epidemic in the past tense, an "invisible enemy" conquered. Two million cases have now been reported in America with over 110,000 deaths reported.
The Trump campaign team are taking no chances. Delegates must sign an indemnity. "By attending the rally, you and any guests assume all risks related to exposure to Covid-19 and agree not to hold Donald J Trump for President Inc. liable for illness or injury". Voters will have to wait just until November, to hold the President to account.
News this week, Melania Trump delayed a move to Washington to avoid a disruption of son Barron's schooling. The delay also presented an opportunity to renegotiate a better prenup agreement."Taking care of Barron, The First Lady is taking no chances ..
Have a great, safe, week-end, wash your hands, don't talk to strangers and stay alert! Don't forget to join me for the monthly round up on line. The Saturday Economist now on ZOOM ... on the 26th June. Including our special features "White House WTF " "Market Wrap" and "Surveys Special" ...
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