UK Economic Recovery Underway says Barclays, Economy Now 85% Back to Normal
- Consumer spending levels have risen sharply
- Exit from lockdown to releases pent-up demand
- But "weekly growth rates may slow" from here
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The UK economy continues to recover from the depths it plunged during the strict covid-19 lockdown, according to economists at Barclays.
New research based on data collected by the high-street lender shows the UK economy has bounced back to 85% of its pre-lockdown capacity, amidst a release of pent-up consumer demand.
"The UK economy has taken another step towards recovery, overcoming initial hesitations and growing to almost 85% of capacity. We see signs of pent-up demand being released on growing interest in car and house transactions," says Fabrice Montagné, an economist at Barclays. "Spend trends show household spending just 5% below normal, despite heavy rotation among sectors."
Image courtesy of Barclays.
"The economy has taken a decisive step in the third week of May and bounced more forcefully out of the lockdown," says Montagné.
The new information on the state of the economy from Barclays comes as the UK enters its latest phase in its exit from lockdown, with businesses such as outdoor markets and car dealers allowed to open their doors once more.
In addition, schools have opened once more - albeit at a limited capacity - which should allow workforce productivity to improve.
With lockdown measures starting to lift today, Chancellor @RishiSunak visited Tachbrook Market in Pimlico to meet traders returning to work. https://t.co/a05s4kEYEx pic.twitter.com/REvUSR2q5e
— HM Treasury (@hmtreasury) June 1, 2020
Confidence in a return to normality appears to be translating into improved consumer confidence with Barclays spend trend indicators showing that household spending is now just 5% off its normal level.
Indicators of mobility, energy consumption as well as interest in car and house purchase are also noted to be keeping up with a solid pace of recovery.
"We now believe that the recovery is very close to our central scenario, and that the economy has overcome its initial stuttering out of the lockdown, now that guidance has been clarified and the sanitary situation continues to improve," says Montagné.
Image courtesy of Barclays.
Further easing of lockdown measures are due on June 15 when the high-street will be opened up once more, even if pubs, restaurants and hospitality businesses will have to wait a while longer.
However, the shape of the economy is by no means likely to be similar to that which preceded lockdown.
"The recovery is far from broad based, with a substantial rotation in economic drivers relative to pre-virus dynamics. Despite some better data in face-to-face trading, offline retail, hotels, restaurants, international travel and public transport are far from their normal levels of activity and are not expected to recover until confidence spreads," says Montagné.
Barclays note that online retail, manufacturing, construction and individual transportation are leading the recovery.
"All things considered we think that available high frequency data point to the economy running at about 85% of normal, which is close to our central scenario and suggests the recovery has built some momentum. From here, however, we believe that weekly growth rates may slow, as growth will be more complicated to achieve: on the demand side," says Montagne.
