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Free AccessMNI DATA IMPACT: UK Q2 GDP Contraction Breaks Records
The UK economy suffered a steeper decline than most other developed countries over the second quarter, even after accounting for a better-than-forecast rebound in June.
Gross domestic product plunged by 20.4% between April and June, largely in line with forecasts of both private analysts and the Bank of England. Eurozone GDP retreated by 12.1% over the same period, while the US suffered a 9.5% decline. UK output fell by 21.7% over the same period of 2019. It was by far the largest quarterly contraction since records began.
The sharp UK contraction came despite an 8.7% rebound in June and an upwardly-revised 2.4% gain in May. That leaves the economy 17.2% smaller than in February. From the February peak to the April trough, output declined by 25.6%.
Services plunged by 19.9% in Q2, accounting for almost 16 percentage points of the fall in total output. Production declined by 16.9% (subtracting 2.25pp from GDP), while construction plunged by 35.0% (shaving 2.16pp from output).
EXPENDITURE SLUMPS
On the expenditure side, household spending plummeted by 23.1% in Q2, contributing 14.32 percentage points to the fall in total output. Government spending declined by 14.0% (subtracting 2.8pp from GDP), despite heavy fiscal intervention from Whitehall. Spending on health slumped by 30.1% in Q2, largely due to delays in non-essential medical outlays, while education spending declined by 25.1%.
The service sector rebounded by 7.7% in June, extending an upwardly-revised 1.5% gain in May (previously reported as +0.9%). Manufacturing expanded by 11.0% in June, following an 8.3% rise in May, while construction jumped by 23.5% in June, after a 7.6% rise a month earlier.
The UK trade surplus, including the volatile precious metals sector, jumped to record-high GBP18.8 billion in the second quarter, adding 3.6 percentage points to GDP, from a deficit of GBP1.2 billion in the opening three months of the year.
Productivity, measured by output per hour, declined by a record 2.5% in Q2. On an annual basis, productivity slumped by 3.0%, the biggest year-on-year fall sine the final three months of 2008.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.