UK sees biggest fall in GDP figures since records began

With figures from lockdown painting a grim picture, this crisis could change consumer habits indefinitely

Article updated: 12 June 2020 1:00pm Author: Helal Miah

  • First full month of lockdown sees economy shrink by 20.4%
  • Unsurprising to see sectors such as accommodation and food services being hardest hit, plunging 91% over the month
  • Latest Industrial and Manufacturing production data also shows a downward trajectory, dropping 20.3% and 24.3% respectively
  • Consumption levels won’t immediately return, and so any recovery in economic activity will therefore be slower than the market rally since the March lows had priced in

April was always going to be the worst month in terms of the hit to the economy and this morning this was confirmed, with the first full month of lockdown seeing the economy shrink by 20.4%. While April’s GDP figures weren’t actually as low as a consensus of economists estimated, the latest Industrial and Manufacturing production data for April, which was released at the same time, were far worse than expected, plunging by 20.3% and 24.3% respectively.

With economies being unlocked, we’ve seen an astonishing recovery in stock markets since the March lows, taking market valuations to what we believed to be unjustified levels. Much of this could be put down to the belief that Central Bank stimulus and Government policies are here to rescue the economy and corporate profitability. Another view postulated has been less experienced investors ploughing into beaten down stocks, while the tech giants in the US have contributed to the US market’s even stronger rebound.

However, we believe the last few days of market pull-back reflects a dose of reality among investors, and the global economy has to a certain extent been permanently damaged by this crisis. Consumers will have had a bit of a lesson from this crisis, and I believe that in the coming months and quarters we are more likely to save more for rainy days than previously. Consumption levels won’t immediately return, and so any recovery in economic activity will therefore be slower than the market rally since the March lows had priced in. I believe the market may now have established a trading range (being the March lows to last week’s high) for the short to medium term.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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