GDP First Estimate (Q2 2020) Preview

GDP: BBG: -20.5% q/q, -22.0% y/y, +8.3% m/m (Jun); Prev (Q1): -2.2% q/q, -1.7% y/y; +1.8% m/m (May)

IP: BBG: +9.9% m/m, -12.2% y/y; Prev (May): +6.0% m/m, -20.0% y/y

Services: +8.2% m/m, -20.3% 3m/3m; Prev (May): +0.9% m/m, -18.9% y/y

• UK prelim Q2 GDP data offers the first official look at just how bad the damage to the economy was in the first 3 months of the lockdown and modest Jun reopening of the economy.
• The UK is expected to be one of the worst hit economies due to the long lockdown, contracting by around 20%
• Q2's drop is likely broad-based with q/q HH spending seen declining by 19.5%, gross fixed capital formation plunging by 27.8%, while gov consumption is projected to tick up 2.0%.
• Exports are forecast to drop by 21.5%, imports are seen falling to -23.9%.
• M/M GDP is expected to show signs of recovery in Jun with markets looking for an uptick to 8.3% as factories opened in mid-May and non-essential shops were allowed to reopen in mid-Jun which should boost activity.
• Challenges may arise in autumn when there are no more lockdown-release boosts to activity.
• As demand remains weak and consumers are cautious due to the high uncertainty regarding the development of the pandemic, a return to pre-covid levels will likely be slow.