The UK economy is heading for a recession that is forecast to be deeper than the 2009 financial crisis and one of the most severe since 1900; the coronavirus pandemic has seen consumer demand collapse and many businesses forced to close or significantly reduce operations.
However, the likely extent of the economic contraction is being continuously revised, reflecting the difficulties in limiting the spread of the virus and the lack of reliable data as businesses are increasingly unable to complete regular surveys.
Looking at more frequent and alternative economic information to track the depth of the slowdown to date. This includes the drop in electricity consumption, the property market virtually grinding to a halt, consumer spending and the fallout on a jobs market that has been incredibly resilient in the past decade.
Economic activity is contracting fast
Business surveys have shown activity crashing faster in March than during the financial crisis, but many European statistics agencies have warned of reduced accuracy of survey-based indicators.
The Office for National Statistics has published experimental research on the impact of Covid-19 on the economy. However, economists warned that it will be more useful to track the economic recovery than the fallout because of their lack of historical comparison.
Instead, data from the European Network of Transmission System Operators (Entso-e), provide a timely indicator of electricity consumption, a broad measure of economic activity.
According to analysis of their data, UK electricity consumption plunged 10 per cent in the last week of March following the introduction of the lockdown compared with the same period last year, despite a lower mean temperature than in March 2019.
UK daily traffic use has also fallen sharply, but this reflects households adopting social distancing measures as well as a reduction in economic activity.
Mobility data based on account locations released by Google show that journeys to workplaces in the UK were 55 per cent lower at the end of March compared with the average of the previous five weeks, reflecting more people working from home and reduced activity.
Workers are losing their jobs at a startling rate
The Department for Work and Pensions has revealed that nearly 1m people applied for universal credit, the government’s main welfare benefit, in the last two weeks of March. But there have been no other official data on the state of the labour market.
However, analysis of the government site “find a job” revealed that on April 7 there were 20 per cent fewer vacancies than at the end of March, with sales and hospitality jobs down 40 per cent.
Source: Financial Times
