Is anyone really surprised that GDP fell by 20.4 percent in April? Perhaps we should be. It doesn’t sound high enough to me. We have just been through a great economic experiment in which most shops have been forced to close, all pubs and restaurants been forced to shut their doors and the public ordered to remain indoors except for essential visits. Road traffic at one point was back to 1950s levels. And yet the economy officially shrank only by a fifth – taking it back roughly to the size it was in 2003.
I am not sure that these statistics quite pass the smell test. According to the breakdown provided by the ONS, accommodation and catering fell by 88.1 per cent. It makes you wonder how that 11.9 per cent still got spent, given that every pub, restaurant, hotel and holiday park was closed. Do we eat that many takeaways? Arts, entertainment and recreation apparently fell by 39.7 per cent. How come we still spent the other 60.3 per cent given that every theatre, cinema, theme park, museum and so on was closed? Does live-streaming and the stuff we buy from Amazon really make up such a big proportion of that sector? ‘Activities of households as employers’ – i.e. cleaners, nannies etc – fell by 22.9 per cent. I suppose the very wealthy have live-in staff who were able to carry on working on the grounds that they are part of their employers’ household, but what about all those casual domestic workers who were suddenly forbidden from working? But most bizarrely of all, ‘real estate activities’ apparently fell by only 2.4 per cent. I guess there were still letting agents renewing contracts and the like, but how come this activity fell by so little when the housing market was essentially closed and no property viewings allowed?
Admittedly, being better off than the average UK household, it is relatively easy for me to cut back on my expenditure – essentials like food and accommodation make up a smaller proportion of my spending than most. Even so, my spending in April fell by more than half compared with my average spending for the past five Aprils, and the same was true in May. If I were typical, we’d have had a GDP contraction of around 60 per cent.
The ONS admits that it had trouble collecting statistics this month. One of its problems has been trying to collect data from businesses which have totally shut up shop. As it explains:
“‘When a business does not respond to a survey, it is not possible from this alone to determine whether it has ceased trading and, if so, if this is permanent or temporary, particularly as current government initiatives allow for the furloughing of workers.’
In other words, it has put its monthly GDP figures together courtesy of businesses who did still have someone answering calls, emails and so on. I can’t help feeling there is a great dark chasm of lost business out there which simply hasn’t been measured.