It is an uptick so small that it could almost be comic, but the UK economy started to grow in May: by 1.8 per cent following a 20 per cent slump in April. Office for National Statistics figures out today show that, even in lockdown, surging online retail sales – coupled with signs of a recovery in construction – show a small increase in GDP. The big question is what shape we can now see: a L, a Nike swoosh or a sharp V?
Today’s increase suggests growth is – every so slightly – on the up, easing doomsday concerns about an L-shape (that is, no recovery at all). But economists are disappointed – the consensus was for a 5 per cent uptick in GDP, and May’s figures fall notably short. The economy is still a quarter smaller than it was at the beginning of the year. Many are abandoning their hopes for a sharp recovery.
Is it premature to throw the V out with the bathwater? Looking back on the original scenarios from the Office for Budget Responsibility and Bank of England, a major surge in growth was expected to come towards the end of Q2 and beginning of Q3. May is still early, especially considering the UK’s decision to tread slowly out of lockdown. Two months ago, the UK was practising the height of its lockdown rules. The advice was just shifting from ‘stay home’ to ‘stay alert’ and the month’s big announcement revolved around liberalising the rules slightly so you could meet another person outdoors. Non-essential shops didn’t open until June; pubs and restaurants opened just ten days ago.
But even the most optimistic scenarios are being revised downwards, as the bounce-back already looks more lacklustre than the original forecasts laid out.