Weak UK May GDP growth hits hopes of sharp post-Covid recovery
By Frank Prenesti
Date: Tuesday 14 Jul 2020
(Sharecast News) - Britain's economy grew by a lower-than-forecast 1.8% in May as businesses started to emerge from the coronavirus lockdown, official data revealed, dampening hopes of a sharp rebound.
A significant improvement on the 20.4% slump in April gross domestic product, the May figure was still well below analyst forecasts of 5.5%, according to the Office for National Statistics (ONS), leading to fears that any economic recovery would now take years rather than months.
Because April's record decline followed a 5.8% contraction in March, the UK economy was still 24.5% smaller in May than it was before the onset of the crisis.
"Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck," said ONS statistician Jonathan Athow.
"In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines."
Ian Stewart, chief economist at Deloitte, said the the bounce back from Covid-19 had got off to a disappointing start.
"The pace of activity will have picked up sharply in June as the easing of the lockdown got underway. The chances of a quick return to normal, of the famed V-shaped recovery, are falling. It is likely to take years, not months, to repair the damage to the economy done by Covid-19."
The services sector, around 80% of the UK's economic output, grew by just 0.9% in May, following a 19% decline in April. Industrial output climbed by 6%. The manufacturing sector grew by 8.4%, while the construction sector rebounded by 8.2%.
Over the last quarter, the services sector fell by 18.9% while production shrank by 15.5%, the ONS said. That included a 37.8% slump in education output due to school closures, and a 31.4% drop in health output following "reduced activity in elective operations and fewer accident and emergency visits"
Food and beverage service activities shrank by 69.3%, while the motor trade contracted by 71% as car sales slumped.
Manufacturing output fell 18.0% in March-May, with the manufacture of transport equipment slumping by 45.7% as many factories remained closed.
The ONS also published industrial and manufacturing production data, which showed manufacturing output arrived at +8.4% month on month in May against expectations of -20.9% and the -24.4% reported in April, while total industrial output came in at +6.0% compared with -20.2% in April and a forecast of +6.0%.
On an annualised basis, the UK manufacturing production figures came in at -22.8% in May, beating expectations of -23.9%. Total industrial output plunged 20.0% in May, against a -20.0% reading expected and the previous -23.8% print.
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