UK GDP Falls Most Since Global Financial Crisis

By | May 13, 2020
UK GDP Falls Most Since Global Financial Crisis

The UK economy contracted the most since the global financial crisis in 2008, due to the measures adopted to reduce the transmission of the coronavirus, the Office for National Statistics said Wednesday.

Gross domestic product fell 2 percent sequentially in the first quarter, which was the largest decline since the fourth quarter of 2008.

Economists had forecast a fall of 2.5 percent after staying flat in the fourth quarter of 2019.

On a yearly basis, GDP decreased 1.6 percent, marking the biggest contraction since late 2009. This was also slower than the expected decline of 2.1 percent.

Data showed that there was a widespread disruption to economic activity in the first quarter. Services output fell by a record 1.9 percent.

At the same time, industrial output fell 2.1 percent driven by a 1.7 percent drop in manufacturing. Construction output decreased 2.6 percent sequentially in the first quarter.

Jonathan Athow, deputy national statistician for economic statistics, said, “With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.”

In the first quarter, gross fixed capital formation fell 1 percent and business investment was flat. Government expenditure dropped 2.6 percent and household consumption was down 1.7 percent.

In March, GDP declined 5.8 percent after contracting 0.2 percent in February. The index of services was down 6.2 percent and the index of production slid 4.2 percent. Construction fell 5.9 percent and farm output dropped 0.2 percent in March.

Another report from the ONS showed that the visible trade deficit totaled GBP 28.12 billion versus GBP 15.5 billion shortfall seen a quarter ago.

In March, the visible trade deficit widened to GBP 12.5 billion from GBP 9.8 billion in February. Likewise, the total trade deficit increased to GBP 6.67 billion from GBP 1.54 billion.