UK Economy Recovering
Although recent data has confirmed that the UK economy is recovering from its coronavirus lockdown slump, the
longer-term outlook (unsurprisingly) remains decidedly unclear. Official data released by the Office for
National Statistics (ONS) showed that the UK economy grew by 1.8% in May, following April’s record 20.3% contraction. While this modest rebound was lower than all forecasts submitted in a Reuters poll of economists, it did at least confirm a recovery is underway. Furthermore, data covering a more recent time period points to a marked
improvement in economic activity across the private sector as lockdown measures have eased. Indeed, the IHS
Markit/CIPS Flash Composite Purchasing Managers’ Index, where any value above 50 represents growth, stood at 57.1 in July. This was a noticeable rise from 47.7 in June and significantly higher than April’s survey-record low of 13.8. Bank of England (BoE) Governor Andrew Bailey also confirmed that he believes the economy has started to
recover. Commenting on UK economic prospects during a webinar organised by the BoE, the governor said: “We are
seeing activity return. We are beginning to see this recovery.” However, Mr Bailey also stressed that the strength of recovery will depend upon how cautious people are about returning to normal life and the risks posed by a potential second wave or localised COVID-19 outbreaks. He also added that it remains unclear how much long-term damage will be inflicted on the economy by companies failing. The Governor’s comments vividly demonstrate the high degree of uncertainty surrounding any assessment of the economic outlook, which has inevitably resulted in a wide range of views emerging. The median forecast, though, in a poll of over 70 economists, conducted by Reuters between 13-21 July, suggests the UK economy will contract by around 9% this year before expanding by 6% in 2021….SFFS Economic Review_July 20