Subrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of Commerce, looks at the latest GDP figures.
The release of monthly and quarterly GDP numbers is a set piece economic event. The released data is seized upon by economists, policy wonks, journalists and politicians. The key GDP growth or decline number is weaved into narratives. Whilst some commentators lament, others rejoice. Yet others adopt a "I told you so" nonchalance. The reaction to economic data releases is a beguiling study of human reaction. Under normal circumstances, I have also known businesspeople being cold to economic data releases. But we do not live in normal circumstances and instead of the range of emotions and reactions, the latest data released by the Office for National Statistics this morning have been met with zen like acceptance. Shocking as it is, the data confirms what we already know: the COVID-19 pandemic has already caused a significant decline in economic activity and put many businesses in distress.
Relative to March 2020, national economic output went down by 20.4% in April, the first full month under lockdown. This follows the 0.2% and 5.8% reductions respectively in February and March. After several weeks of lockdown, the deep bite of the coronavirus has been laid bare and businesses and communities are feeling the pain. It goes without saying that the monthly contraction in April outstrips the figures recorded during the 2008/09 recession. The COVID-19 pandemic has caused an economic crisis like no other.
The lead up to and implementation of full lockdown was, of course, fast moving and business were trying to make sense of and tap into the support measures announced by the Government. To understand the economic downturn and how businesses are responding to the crisis, the Chamber launched the GM Business Monitor as an ongoing COVID-19 tracker. The Business Monitor surveys covering April showed that customer demand had fallen to its lowest levels ever with 90% of respondents saying they had seen a sharp reduction in sales and revenue. On top, many businesses continue to struggle with reduced cashflow positions. The crisis did not spare any sectors. Although the services sector group, consisting of hospitality, entertainment and retail, was the worst affected output in the manufacturing sector also showed a decline. In many ways, the Business Monitor surveys gave a forward view about the challenges businesses were facing and helped the Chamber lobby and influence Government decision making.
The Chamber's Quarterly Economic Survey (QES) for Q2 has just closed and early indications are that business activities are beginning to stabilise and no longer in free fall. The QES is an important piece of research because it is the first business survey to be launched every quarter. The rapid turnaround from gathering responses to publishing the results helps obtain that 'forward view'. National data releases often confirm QES findings.
In the last few weeks, the discourse has changed to recovering and reopening. When asked about their intentions to reopen, over three-fourths of the business respondents said they are keen to restart normal business activities and could reopen to at least partial trading with social distancing and other safety measures in place. The picture for June is likely to more upbeat when compared to the gloomy data from April. We know that because the QES results indicate there will an upturn in the next few weeks.