The 2% fall in GDP was better than expected - but that's where the good news ends
Some sectors did well in the first quarter, despite the pandemic, but it could be bad news for the next few months at least.
Wednesday 13 May 2020 12:09, UK
It might sound odd, given this was the worst decline in GDP since the financial crisis and given it almost certainly presages a recession, to say that today's economic statistics were a little bit better than expected.
But the reality is economists were expecting a bigger decline in Q1 gross domestic product - closer to 3% - than the eventual 2% fall.
Nor did every sector of the economy see a contraction in the first quarter of the year: some, including IT services and pharmaceutical manufacturing, actually expanded - a reminder that some businesses will actually do very well out of the pandemic.
However, that is more or less where the good news ends and the bad begins.
It's worth remembering that the falls we are seeing in economic activity around the world are largely a reflection of the lockdown measures imposed by governments.
The UK was relatively late to impose a lockdown and this helps explain why other countries which moved quicker - Italy, Spain, France and China, for instance - have seen far bigger contractions in the first quarter.
But in much the same way, the UK is expected to see a far sharper decline in the second quarter of the year - the one we're in at the moment.
Two successive quarters of contraction is of course the standard definition of a recession, but calling this a recession isn't quite right. It is both better and worse. Worse because the scale of decline is expected to be far deeper than during any comparable recession in recent memory - the worst, potentially, since the earliest days of capitalism.
But better too, because most economists still expect the UK to bounce back relatively quickly. After all, unlike most recessions, where a part of the economy has overextended itself or is in need of a correction, this is a government-imposed shutdown. That means the rebound could be far faster than following the financial crisis.
Then again, that really depends on two factors. The first is that the lockdown ends relatively soon. The second is that most sectors can return to something like normality once the lockdown passes. These are big provisos, especially the second. Can the hospitality and accommodation sector, for instance, really expect business as normal any time soon?
The scale of uncertainty is enormous, in both directions. Which makes attempting to forecast the economic future all the more difficult.