UK GDP Shrinks By 2% In First Quarter

The ONS has reported on the latest GDP figures, revealing that GDP declined by 2% in the first quarter of 2020 - the lowest rate since the three months to December 2008, when the investment bank Lehman Brothers collapsed. 

Specifically, in March, the figure fell by 5.8%.

Nearly all industries contributed to the fall, including the services sector which declined by 1.9% (retail is included in this sector); the production sector which fell by 2.1%, and the construction sector, which saw output drop by 2.1% in Q1 2020. 

Earlier today, the BRC and KPMG published data that showed a record decline in retail sales for the month of April.

Statistician’s comment

Commenting on today’s GDP figures, Jonathan Athow, Deputy National Statistician for Economic Statistics, said:

“With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.

“Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.

“Although very few industries saw growth, there were some that did including IT support and the manufacture of pharmaceuticals, soaps and cleaning products.

“The pandemic also hit trade globally, with UK imports and exports falling over the last couple of months, including a notable drop in imports from China.”

A larger decline in the current quarter is expected by economists.

Commentary

Ross Counsell, Director of Good Move comments

“There will be pent-up demand from buyers that built up over the lockdown period which will be released as restrictions are eased. We expect buyers will now formulate their offers with an element of caution as the outlook for the wider economy is poor and likely to have a negative effect on future house values. Mortgage lenders will require larger deposits and may shift the parameters of their stress tests/affordability calculations – this combined with job losses and income uncertainty will take some buyers out of the market.

“Sellers will begin to adjust their expectations on the price they will achieve and may be more inclined to accept a lower offer if they expect a downward market. Some sellers will be reluctant to allow people in to their home for appraisals/viewings etc due to health concerns and be taken out of the market. We expect a rise in distressed sales and sellers motivated by financial difficulty.”

Source: https://goodmove.co.uk/

Source : Insight DIY Team and ONS

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