On Wednesday, Q1 GDP in the UK will be reported. Even though the full lockdown happened at the end of March, and there was an ample rebound in economic activity in January and February, we will likely see a negative number. This is due to a combination of the effects of February’s flooding, and rising uncertainty due to lockdown. Grim coronavirus headlines did not help. This blend led to retail sales in March declining more than 5%, while service sector activity hit 34.5, a record low at the time. April’s number beat that with just 12.3.
The March lockdown in Germany is expected to hit economic activity hard. Combined with almost a 6% plunge in retail sales, the biggest in 20 years, it’s highly likely there could be a 3 % contraction in Q1 in Germany, with figures showing up on Friday.
Having been locked down in February, economic activity in China, the world’s second biggest economy, has struggled to recover since then. The Chinese economy contracted by 6% in Q1. Since the economy reopened there has been little evidence that Chinese consumers have felt inclined to spend, after retail sales declined 20.5% and 15.8% in February and March respectively. The April numbers, published on Thursday, should be better. Economic activity is still expected to improve, with industrial production to move back into positive territory. Rising unemployment, however, is likely to act as an additional brake on a strong rebound. We will focus on that on Friday.
Despite the US economy being late in locking down its economy in March, retail sales still fell a record 8.7%, as millions of Americans were suddenly thrown out of work in the last two weeks of the month. A decade of jobs growth was wiped out in a matter of weeks. The unemployment spiked sharply from 3.8% to 20% in fairly short order and stopped personal spending in the process. April retail sales, published on Friday, are likely to hit a new record low of -10%, with the full effects of the virus lockdown.
