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There was a pointy fall in client spending on the finish of March, the ONS mentioned
The UK economic system shrank greater than first thought between January and March, contracting 2.2% within the joint largest fall since 1979, official figures present.
The Workplace for Nationwide Statistics (ONS) revised down its earlier estimate of a 2% contraction, with all the principle financial sectors dropping.
There was a major financial impression in March, because the coronavirus pandemic started to have an impact.
The information comes because the prime minister is ready for a serious speech on the economic system.
Jonathan Athow, deputy nationwide statistician on the ONS, mentioned: “Our extra detailed image of the economic system within the first quarter confirmed GDP shrank a bit greater than first estimated.
“Info from authorities confirmed well being actions declined greater than we beforehand confirmed.
“All important sectors of the economic system shrank considerably in March as the consequences of the pandemic hit.”
The primary-quarter contraction is now the joint greatest drop for the reason that July-to-September interval in 1979.
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Mr Athow mentioned: “The sharp fall in client spending on the finish of March led to a notable enhance in households’ financial savings.” The brand new information confirmed that GDP contracted by 6.9% in March.
The primary-quarter figures present that the providers sector – which accounts for about three-quarters of UK GDP – shrank by a report 2.3%.
The ONS mentioned manufacturing output fell by a revised 1.5% within the three months, pushed by declines in manufacturing as factories quickly shut down, whereas there was a fall in development output of 1.7%.
The coronavirus lockdown solely got here into power on 23 March, so figures for the second quarter of the yr will present the complete hit on the economic system.
Latest ONS month-to-month figures confirmed the economic system plummeted by 20.4% in April – the most important drop in a single month since data started.
That contraction was 3 times higher than the decline seen throughout the entire of the 2008 to 2009 financial downturn.
Off the size
It says one thing that the primary quarter of the yr was the worst for the economic system in 41 years – and but it was nonetheless barely a tenth the dimensions of the contraction in exercise in only one month – final April.
The figures put the federal government’s “construct construct construct” announcement in perspective. The £5bn infrastructure spending being “introduced ahead” is just not new cash in any case. It was put aside within the pre-election manifesto at a time when the economic system seemed very totally different.
Examine it, say, to the £69bn it is estimated that small companies will lose within the pandemic as a result of they’ve needed to cease buying and selling (based on analysis by small enterprise insurers Merely Enterprise). Or evaluate it to complete public spending of greater than £1,000bn, and it is lower than 0.5%.
Towards the dimensions of the economic system based mostly on the newest GDP numbers, the mooted infrastructure spend is extra like 0.25%. The federal government’s going to have to spend so much greater than that to stimulate a restoration from a hunch on this scale.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, mentioned the newest figures may very well be summed up in a single line: “The most important contraction for 40 years, despite the fact that Q1 contained simply 9 lockdown days.”
The information “was simply the prelude”, with worse to return, he added.
Nonetheless, whereas economists are braced for a dire set of second-quarter figures, Howard Archer, on the EY Merchandise Membership, believes April’s sharp contraction is prone to have been the low level.
He predicted the economic system would “return to clear progress within the third quarter with GDP increasing near 10% quarter-on-quarter” as lockdown restrictions are eased additional.
Spending accelerated
Afterward Tuesday, Boris Johnson is ready to make a keynote speech on the economic system, with a promise to “construct again higher”.
Talking within the West Midlands, the prime minister will say he needs to make use of the coronavirus disaster “to sort out this nation’s nice unresolved challenges”.
As a part of what he’s anticipated to name a “new deal”, Mr Johnson will set out plans to speed up £5bn of spending on infrastructure initiatives.
In the meantime, separate ONS information on the nation’s funds confirmed that Britain’s present account deficit widened by greater than anticipated within the first quarter.
The steadiness of funds deficit – the distinction between the worth of the products and providers {that a} nation imports and the products and providers it exports – rose to £21.1bn, or 3.8% of GDP.
This implies the UK is reliant on inflows of money from overseas and leaves the pound susceptible, based on Mr Tombs.
“Sterling virtually actually would depreciate sharply once more if a serious second wave of Covid-19 emerges or if the UK and EU fail to both signal a commerce deal or to increase the transition interval earlier than the top of this yr,” he mentioned.