GDP Fell by 5.8% in March 2020, And By 2% Overall In The First Quarter Of 2020

Figures from the Office for National Statistics (ONS) show that GDP fell by 5.8% in the UK economy in March 2020, and by 2% during the first quarter of 2020 (i.e. January - March 2020). Analysts predicts that the GDP figures for the second quarter will be even worse, given that the coronavirus lockdown did not begin  until the 23rd March 2020, and remains ongoing.

GDP Fell By 5.8% In March 2020

The ONS report that GDP fell by 5.8% in March 2020, the largest fall since the ONS started producing its statistics in 1997. The ONS also report that:-

• GDP fell by 2% over the first quarter of 2020, the largest fall since the final quarter of 2008 (i.e. when the banking crisis hit the economy)
• Services output contracted by 1.9% during the period January -March 2020, whilst production fell by 2.1% and construction by 2.6% during the same quarter. Most of the decline occurred during March 2020 as a result of the impact of the coronavirus lockdown. During that month, services output fell by 6.2%, production by 4.2%, and construction by 5.9%.
• Despite the huge amount of hoarding and panic buying in March 2020, with supermarket shelves being emptied, household consumption still fell over the first quarter of 2020 by 1.7%. This again represented the largest fall since the final quarter of 2008. Moreover a report from Growth for Knowledge found that consumer confidence plummeted to -34% during the final 2 weeks of March 2020, the largest fall since records began in January 1974.
• Whilst unemployment is forecast to increase sharply in the second quarter of 2020, the impact of the coronavirus lockdown has yet to show up in the official labour market statistics. The statistics for the first quarter show that the number of people in employment was 33.14 million, an increase of 448,000 compared with the first quarter of 2019. Meanwhile, unemployment was 1.35 million during the quarter to March 2020, an increase of 50,000 compared with the same quarter in 2019. Nevertheless, the fact that 2.9 million claims for universal credit have been received between the 1st March 2020 and the 19th May 2020, indicates that unemployment will surge during the second quarter of 2020.

Amount GDP Fell Is less Than Was Predicted

Poor as the GDP figures are, they are actually less than what was actually forecast. Some analysts had predicted a fall in GDP of 7.2% for March, whereas GDP fell by 5.8%. Moreover, analysts predicted that GDP would fall by 2.5% during the first quarter, whereas in actual fact GDP fell by 2% during the period January - March 2020

The Second Quarter And Beyond

The EY Item Club have predicted that it will take 3 years for the UK economy to return to its pre-coronavirus pandemic levels, and predict that UK GDP could contract by around 6.8% in 2020, before rebounding with an increase of 4.5% in 2021. Moreover, the National Institute of Economic and Social Research (NIESR) predict that the UK economy will contract by around 7% overall in terms of GDP in 2020, with a second quarter fall in GDP of between 15% - 25%. The Office of Budget Responsibility are more pessimistic, predicting a second quarter fall of 35% of GDP, and by 13% for the whole of 2020. Furthermore, Gertjan Vlieghe, a member of the Bank of England's interest-rate setting committee, states that: "Based on the early indicators, and based on the experience in other countries that were hit somewhat earlier than the UK, it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries."