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UK economy shrank in February before Covid-19 crisis hit

By Sean Farrell

Date: Thursday 09 Apr 2020

UK economy shrank in February before Covid-19 crisis hit

(Sharecast News) - The UK economy shrank in February even before the full effects of the Covid-19 pandemic began to hit businesses and consumers, official figures showed.
Output fell 0.1% in February after growing 0.1% in January, the Office for National Statistics said. The monthly figure can be volatile but it highlights changes not captured in less jumpy longer-term numbers.

The signs were barely any better over three months. In the period to February output rose by just 0.1%, hardly any improvement on the zero growth registered in the three months to January, .

Services, which make up about three-quarters of the economy, was the only sector to grow in the three months to February, edging up 0.2%. Production output, which includes manufacturing, fell 0.6% for the 10th three-month period running and construction dropped 0.2%.

Rod Kent-Smith, head of GDP at the ONS, said: "Today's figures show that in the three months to February, which was before the full effects of coronavirus took hold, the economy continued to show little to no growth."

The figures show the economy failing to improve two months after the Conservatives' election victory on 12 December. The election result cleared much of the uncertainty about Brexit that had weighed on business and consumer confidence during 2019 and seemed to promise a return to growth.

Lack of growth left the economy in a weakened state before the full effect of the Covid-19 crisis arrived. The ONS said there were signs of weakness in trades such as travel as the impact began to spread from China in February.

Experts say the economy is now in freefall as government restrictions suppress activity and uncertainty over the length and severity of the crisis hit investment and spending.

Paul Dales, chief UK economist at Capital Economics, said February's figures were "the calm before the storm of a lifetime". He predicted a drop in output of about 5% in March - a similar drop to the whole of the financial crisis compressed into one month.

"The coronavirus lockdown will mean that in March and April GDP will fall at a speed and magnitude no one has ever seen and no economy has ever experienced before," Dales said.





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