UK economy shows green shoots of recovery with growth in third quarter likely as lockdown eases
24 June 2020
Posted by: William Barns-Graham
The UK economy is showing its first signs of post-coronavirus growth, with figures for global commerce this year also less severe than previously feared.
A leading monthly survey that tracks output, new orders and employment in UK manufacturing showed a return to growth for UK manufacturing in May.
The IHS Markit/CIPS Purchasing Managers’ Index – where anything over 50 indicates growth - was 50.1 for June in manufacturing, up from 40.7 in May, following a record low of 32.6 in April.
Services, which comprise 80% of the UK economy’s output, continue to contract but less so than in May, rising from 29 to 47 for June.
The news comes as the government continues to ease lockdown restrictions for businesses and consumers.
Yesterday the prime minister announced an easing of the 2-metre distancing rule, opening the way for large parts of the hospitality sectors to resume.
Chris Williamson, the chief business economist at IHS Markit, told the Guardian that the PMI data indicates the economy is likely to return to growth in the third quarter.
However, Williamson also said longer term uncertainty, particularly around the threat of a second wave of the coronavirus, remains.
The economy contracted by 2% in Q1 2020 despite the lockdown only coming into effect in mid-March.
With figures for April showing a 20.4% plunge in economic activity, it is expected that Q2 will see one of the largest contractions on record.
Global trade has also been ravaged by the coronavirus, but to a lesser extent than first feared.
The WTO estimated that goods trade fell by 3% in Q1 and 18.5% in Q2. In April the WTO predicted an overall fall in 2020 of between 13% and 32%.
If global trade recovers in Q3 and Q4, it is hoped that the figure for 2020 will be closer to the lower end at 13%, but this will still be higher than the 12.5% decline at the peak of the financial crisis in 2008-9.
“The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record,” said WTO director‑general Roberto Azevedo. “But there is an important silver lining here: it could have been much worse.”