The crisis made by coronavirus in UK impacted its economy. As the country remains under a nationwide lockdown, Britain promises to expand coronavirus testing.
A survey suggested that Britain’s economy may worsen as businesses reported a dramatic decline in demand during a nationwide lockdown.
The IHS Markit/CIPS Flash UK Composite Purchasing Managers’ Index (PMI) dropped to a new record low of 12.9 from 36.0 in March. It is not close to the lowest forecast in a Reuters poll of economists that had generated a reading of 31.4.
The weight of the decline all but hints a heavy contraction in the world’s fifth-largest economy. This may increase doubts about whether financial assistance from the government has been given to businesses quickly enough.
“The dire survey readings will inevitably raise questions about the cost of the lockdown, and how long current containment measures will last,” Chris Williamson, chief business economist at IHS Markit, said.
Services sector
Williamson furthered that the figures on the face of it created a 7% quarter-on-quarter contraction in the economy. He warned that this could be an understatement as its survey does not include retailers or most self-employed people.
A Reuters poll of economists emphasized a roughly 13% contraction in economic output in the current quarter. This would be the biggest since records started after the World War Two.
Data company IHS Markit reported that 81% of British services companies and 75% of manufacturers recorded a fall in business activity.
Only some medical and food and drink manufacturers manifested growth in April. Some services companies involved in online retail and the public sector also showed growth.
Employment plunged at the fastest pace since PMI records began in the 1990s. In some cases, this could be caused by the use of the government’s furlough scheme, according to data company IHS Markit.
Government budget reviewers predicted that unemployment may soar as high as 10%. About two million people more may lose their jobs if a three-month lockdown was only slowly eased over the next three months.
Companies cut prices at a record pace to prop up demand, the survey says.
The PMI for the services sector, which is about 80% of Britain’s private sector economy, dropped to 12.3 from 34.5, another record low.
Manufacturers performed a little better as output and new orders slowed down.
In earlier months, a lengthening of supplier delivery times helped improve the headline PMI for manufacturers. However, it still dropped to a record low of 32.9, from 47.8 previously.
State of the global economy
According to the International Monetary Fund (IMF), the global economy may not recover from the coronavirus outbreak even next year.
IMF downgraded its economic predictions. The fund suggests that the global economy will plunge by 3% this year before recuperating by 5.8% next year. Gopinath describes this rebound as a “partial recovery.”
“We have a recovery projected for 2021 of 5.8% growth, but that is a partial recovery,” Gopinath told CNBC’s “Squawk Box Asia."
“So even by the end of 2021, we’re expecting level of economic activity to be below what we had projected before the virus,” she noted.
