UK economy faces long climb back to health

UK economy faces long climb back to health
Pedestrians, some wearing a face mask or covering due to the COVID-19 pandemic, walk along a quite shopping street in London on August 12, 2020. Britain's economy contracted by a record 20.4 percent in the second quarter with the country in lockdown over the novel coronavirus pandemic, official data showed Wednesday. (AFP)
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Updated 13 August 2020

UK economy faces long climb back to health

UK economy faces long climb back to health
  • Wave of job losses feared after data shows record 20 percent economic hit

LONDON: Britain’s economy shrank by a record 20.4 percent in the second quarter when the coronavirus lockdown was tightest, the most severe contraction reported by any major economy so far, with a wave of job losses set to hit later in 2020.

The scale of the economic hit may also revive questions about Prime Minister Boris Johnson’s handling of the pandemic, with Britain suffering the highest death toll in Europe. More than 50,000 UK deaths have been linked to the disease.

“Today’s figures confirm that hard times are here,” Finance Minister Rishi Sunak said. “Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.”

The data confirmed that the world’s sixth-biggest economy had entered a recession, with the low point coming in April when output was more than 25 percent below its pre-pandemic level.

Growth restarted in May and quickened in June, when the economy expanded by a monthly 8.7 percent — a record single-month increase and stronger than forecasts by economists in a Reuters poll.

However, some analysts said the bounceback was unlikely to be sustained.

Last week the Bank of England (BoE) forecast it would take until the final quarter of 2021 for the economy to regain its previous size, and warned unemployment was likely to rise sharply.

Any decision to pump more stimulus into the economy will hinge on the pace of growth in the coming months, and whether the worst-hit sectors such as face-to-face retail and business travel ever fully recover.

The second-quarter gross domestic product (GDP) slump exceeded the 12.1 percent drop in the euro zone and the 9.5 percent fall in the United States.

Some economists said the sharper decline partly reflected the timing of Britain’s lockdown — which fell more in the second quarter — and its dependence on domestic consumer spending.

Suren Thiru, an economist with the British Chambers of Commerce, said the recent pickup probably only reflected the release of pent-up demand rather than a sustained revival.

“The prospect of a swift ‘V-shaped’ recovery remains remote,” he said.

Britain’s unemployment rate is expected to jump when the government ends its huge job subsidy program in October.

Sunak said he saw “promising signs” in GDP data for June and reiterated his opposition to extending the program. In July he cut sales tax for the hospitality sector and in August is subsidising restaurants to draw in diners.

Hotels and restaurants did just one fifth of their normal business in June, when the lockdown was still largely in force.

British GDP shrank by 2.2 percent in the first quarter of the year, reflecting the lockdown that started on March 24.


Copper slips as China’s coronavirus outbreak raises demand fears

Copper slips as China’s coronavirus outbreak raises demand fears
Updated 33 min 51 sec ago

Copper slips as China’s coronavirus outbreak raises demand fears

Copper slips as China’s coronavirus outbreak raises demand fears
  • The metal reached an eight-year high of $8,238 on Jan. 8

LONDON: Copper fell on Friday alongside stock markets and oil prices as poor economic data and new coronavirus restrictions in China, the world's biggest raw materials consumer, weakened the outlook for economic growth and demand.
But losses eased after U.S. factory figures showed activity surging to its highest level in nearly 14 years in early January.
Benchmark copper on the London Metal Exchange (LME) was down 0.2 percent at $8,005 a tonne at 1700 GMT, off an earlier low of $7,864.50.

The metal reached an eight-year high of $8,238 on Jan. 8.
"We are just hitting the buffers here," said Saxo Bank analyst Ole Hansen. "Commodities had a phenomenal run, and that just screams correction."
A coronavirus outbreak in China and the upcoming Chinese Lunar New Year holiday may curb industrial activity.

This and slow progress suppressing the virus in Europe and the United States are forcing investors to reassess copper's near-term outlook, he said.
But many analysts, including Hansen, say supply will tighten as the year progresses, pushing prices higher.