UK: GDP seen contracting around 5% this year – UOB

FXStreet reports that Lee Sue Ann, economist at UOB Group, assessed the latest retail sales figures and PMI results in the UK.

“UK retail sales came in at -5.1% m/m in March versus -5.0% m/m expected, and -0.3% m/m in February. Core retail sales, stripping auto motor fuel sales, stood at -3.7% m/m versus -4.0% m/m expected, and -0.5% m/m previously.”

“In a further worrying sign for UK retailers, a separate report earlier today showed UK consumer confidence held at the lowest levels in more than a decade. The GfK said its measure of sentiment came in at -34 in April. This is close to the troughs seen during the Global Financial Crisis (GFC) in 2008.”

“In fact, the COVID-19 pandemic has hit Britain’s economy in April with more force than even the most pessimistic forecasters had feared as businesses reported an historic collapse in demand during a nationwide lockdown.”

“… the IHS Markit/CIPS Flash UK composite Purchasing Managers’ Index (PMI) fell to a new record low of 12.9 in April from 36.0 in March, not even close to the expected reading of 29.5. The services measure fell to 12.3 from 34.5 previously. The manufacturing PMI held up better, dropping to 32.9 from 47.8…”

“The scale of the collapse all but guarantees a huge contraction for the UK economy and will add to doubts about whether financial help from the government has reached businesses quickly enough. For now, we expect the UK economy to contract by nearly 5% in 2020. But with the bleak outlook, the risks to our growth forecasts are to the downside, reflecting also the government's decision to extend the lockdown.”