April: Sunny Side Up?

Posted on Jun 12, 2020. by NTI

Starting with the good news, it was the sunniest April on record for the UK, according to an analysis of the month’s climate statistics by the Met Office. All UK countries made it into the top five 'sunniest since records began', in 1929. The location with the highest number of sunshine hours was the Isle of Wight with 279 hours, although we are not sure that counts as most of its population is still stuck in 1963.  

While we were inside looking out on limitless blue skies, unblemished by aircraft contrails, output in the UK plunged 20.4 per cent in the same month, compared with March, which was itself a serious under-performer. It doesn't seem to be 'news', but (and it is now official - according to the Office for National Statistics) this is by far the largest contraction since monthly records began in 1997 and follows a 5.8 per cent contraction in March, the previous record fall. Some economists are kicking themselves, as they only forecast a fall of 18.4 per cent for April, and we all know how economist like to lead with the gloom, before following up with out-and-out despondency.

However, for those who enjoy their minds being boggled, the April contraction significantly outweighs the downturn during the 2008-9 financial crisis when the sharpest fall was a monthly dip of 1%. Of course the cause of these most recent numbers was the full lockdown with extensive business closures, the population required to stay indoors, but even the ever cool (and next James Bond) Rishi Sunak admitted that "the pandemic is having a severe impact on our economy". We have furlough, business loans, deferred tax, grants and tax cuts protecting thousands of businesses and millions of jobs, but the numbers seem even bigger than they appeared in the rear-view mirror.

Output in the services sector, which accounts for about 80 per cent of the economy, fell by 19 per cent in April compared with the previous month. Industrial production shrank 20.3 per cent, with the biggest fall reserved for 'transport equipment' (which includes the manufacture of cars) being 28.3 per cent. With most construction sites closed the UK's new housing sector constricted by a gob-smacking 40.1 per cent in April, with UK exports also falling by 26 per cent and imports by 19 per cent.

One of NTI's favourite economists, Andrew Wishart at consultancy Capital Economics, said: “Having plumbed those unprecedented depths, the economy is now on the return leg. But the recovery will be a far more drawn-out affair than the collapse. While the trough in activity is now behind us, the fiscal cost of the collapse and the rise in the unemployment rate to over 8 per cent that will result are only just starting to emerge.” We are not apparently, any longer looking for a 'V-shaped' recovery and are on our knees praying for a 'U'.

On the upside my Uncle Dennis' ice-cream van sold more flakes in April than in any other month since records began (and CostCo opened in his area).

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