MNI DATA IMPACT: UK April GDP Contraction Worse Than Feared

- UK Economy Contracts 25% Since Feb, Last Smaller in July 2002

     LONDON (MNI) - The UK economy slumped in April, contracting further than

already-dire forecasts suggested, as the country entered lockdown during the

final week of March.

     The following are the main points from the April gross domestic product and

trade reports released on Friday by the Office for National Statistics.

     - GDP plunged by 20.4% in April, by far the biggest fall on record in a

series dating back to 1997, extending a 5.8% decline in March. With the economy

still under quarantine for much of May, there is little chance of a recovery in

May.

     - The contraction leaves the economy smaller than during the financial

crisis, with the index level of GDP at its lowest level since July 2002.

     - Over the three months to April, output fell by 10.4%, also a record fall,

after a 2.0% decline in the first quarter. The jaw-dropping April outturn

overshadows economic softness that predated the arrival of Covid-19. Output has

not expanded on a rolling three-month basis since November.

     - All three output components posted record-large declines between March

and April. Services slumped by 19.0% (series dates back to 1997); manufacturing

plunged by 24.3% (series dates back to 1968) and construction collapsed by 40.1%

(series dates back to 2010).

     - ONS officials voiced confidence in the accuracy of the data, noting that

survey response rates outside of the construction industry were fairly high,

despite widespread business closures through April. Survey responses, weighted

by turnover, reached 84.4% in services (compared to 97.1% in January, 79.8% in

production (compared to 84.8% in January) and 65.6% in construction (compared to

79.0% in January).

     - The weaker than expected data raise questions about the mild recovery

cited by a number of Bank of England officials over the past several weeks,

particularly with the UK coming out of lockdown later than a number of European

countries.

     - The prolonged restrictions on air travel and hospitality businesses are

likely to continue to dampen GDP in May. Air transport declined by 93% in April,

while travel and tour operators suffered an 89% fall in turnover. Together the

pair account for over 0.8% of GDP. Food and beverage service activities - which

contribute almost 2% of GDP - plunged by almost 89% in the month.

     - The UK trade deficit was revised sharply in Q1, to GBP1.110 billion from

the GBP4.774 billion reported last month. The suggests that trade will have a

less negative impact in later iterations of GDP, although ONS officials declined

to quantify the expected effect. Net trade subtracted 1.91 percentage points

from GDP in Q1.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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