The stronger performance of some indicators than during the first lockdown pointed to a smaller hit to the economy than in the spring, analysts said
The stronger performance of some indicators than during the first lockdown pointed to a smaller hit to the economy than in the spring, analysts said © Chris Ratcliffe/Bloomberg

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The latest Covid-19 restrictions across the UK are affecting the economy less severely than the nationwide lockdown in the spring, unofficial data suggest.

A new lockdown in England, firebreak restrictions in Wales and travel curbs in Scotland and Northern Ireland resulted in sharp contractions across many measures of consumer services activity in early November.

However, so-called high-frequency indicators of the broader economy, including volumes of people travelling to workplaces and heavy goods vehicle traffic, remained largely unchanged compared with before the restrictions were imposed, reflecting that most factories and building sites remained open.

The stronger performance of some indicators than during the first lockdown pointed to a smaller hit to the economy than in the spring, analysts said.

“High-frequency data reiterates that the economic damage from this lockdown is unlikely to be as severe as the first . . . because some sectors are obviously still open that weren't first time around, but also because businesses in the hardest hit sectors are a little more set up for lockdown than before,” said James Smith, economist at financial services company ING.

“The economy is still well below its pre-virus size which, put simply, means there is less to be lost this time around,” he added.

Despite the restrictions, the volume of heavy goods vehicle traffic in Great Britain, a measure of industrial activity, was broadly unchanged in early November compared with the previous two months, government data showed. This contrasts with a sharp contraction in the spring.

Line chart of Great Britain, % of February's level, rolling 7-day average showing Heavy goods vehicle traffic remains stable

The number of trips to workplaces in the UK was also broadly stable in the first 10 days of November compared with the previous two months, according to Google statistics, in contrast with a steep drop-off in the spring.

And in the week ending November 8, the number of ships entering UK ports, a measure of trade, increased compared with the previous week.

Despite this resilience of some production-related measures, the data also laid bare the impact of the new restrictions on sentiment and activity in many consumer services industries that have yet to recover from the previous lockdown.

In the first two days of the lockdown in England, UK consumer confidence — measured by the percentage of people who were optimistic about their financial wellbeing compared with those who were pessimistic — plummeted to minus 10 from minus 1 in September, figures compiled by advisory firm PwC showed on Monday. This was the sharpest decline since March, when the first lockdown began.

Line chart of UK, % change compared with January showing Visits to shops and recreation venues have plunged

Consumer spending contracted 2.8 per cent in the week ending November 8 compared with the same week last year, down from a 1 per cent expansion in the previous week, but a smaller drop than in March, according to Fable Data, a company that tracks bank transactions.

Andrew Goodwin, economist at consultancy Oxford Economics, said high-frequency economic indicators “appear to have dropped to levels seen in early summer, rather than the much lower levels of activity we saw in April”. This reflected a less stringent lockdown and the decision to keep schools open that “has allowed working parents to keep working”, he added. 

Travel to shops and recreation venues across the UK plummeted to less than half of January’s level in the first week of the English lockdown, but not as large as the contraction in the first week of the spring lockdown, Google data showed.

Anna Titareva, economist at bank UBS said she expected the economy “to decline less than during the spring restrictions”. She forecast a 3.5 per cent gross domestic product contraction in the last three months of the year compared with the previous quarter. In the three months to June, the economy shrank a record 19.8 per cent.

George Buckley, economist at financial services company Nomura, said: “Households and firms are in a better position to adapt more quickly and effectively to preserve more of their daily business than before.” Moreover, the progress of trials for vaccines against Covid-19 “should support confidence ahead of vaccination”.

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