The global economy seems to be on track for a swift recovery. PMI prints across key geographies improved over the month, notwithstanding the effect of ongoing restrictions. What’s more, firms are increasingly upbeat on the outlook and even indicated reduced firing intentions.
With the release of UK GDP data for December the curtain has been drawn on 2020 (or statistically speaking anyway). But the effects of a year that saw the economy contract by a record 10% will live with us for some time yet. At least there are hints in the data that improvement lies not too far away.
The oft-repeated light at the end of the tunnel may just be glowing a little brighter. Falling infection rates coupled with the timely vaccine rollout, the impressive housing market bounceback and an optimistic forecast set by the Bank of England are all stock for the refreshment station of this long marathon. But this is not the only race we are running. A timely reminder last week came on the miles ahead to protect the natural world.
There’s no doubt the lockdown has taken a significant toll on the UK economy. Add to that Brexit effects are showing up in the form of higher costs and disruptions at the border. But the pace of vaccination remains very impressive, and with it confidence builds of a strong recovery. An outlook echoed by the IMF this past week.
The going was expected to get tough. Whether it is the newly released transactions data or the familiar PMI prints, indications are the UK economy’s Covid recovery has gone into reverse. But we could recover “at a rate of knots” from the second quarter, as per the Bank of England’s Chief Economist, with the roll out of the vaccine. Fingers crossed!
It’s going to be some more time before we can wake the UK economy from its economic slumber. Last week, virus-led restrictions tightened in Scotland, Wales & Northern Ireland. And there are ominous signs of further weakening activity in January. That said, the November GDP print has strengthened hopes of lesser-than-expected damage in Q1 2021.
A new variant of the virus has sent cases soaring, pushing the UK into a third lockdown. With it will come a setback to the recovery. Only the vaccine can unlock its resumption.
PMI survey readings for November unsurprisingly indicated a setback in the recovery. The silver lining is that it’s a lot less compared to the first lockdown. It’s the challenge beyond implied by a stricter tiering system that’s the new concern. A difficult winter no doubt. The recovery will only get down to business when a vaccine is rolled out.
The incoming data for October shows what was widely expected, a slowdown in momentum. Mobility indicators have retreated as much of the world has reverted to some combination of reimposed restrictions. At least there are hopeful signs across countries of the latest wave having peaked or indeed being in retreat, but it is still early days.
While it’s lockdowns and growth downgrades on this side of the World, things are different over in China. Its impressive recovery rolls on, with the export sector playing a handy supporting role.
