Past the nadir, but normal a long way off

While the latest data suggest that our estimate that GDP has fallen by an eyewatering 25% from peak to trough is in the right ballpark, it looks as though the most restrictive parts of the coronavirus lockdown will be eased in May rather than in June as we had assumed. As a result, April was probably the nadir for the economy and it is likely that GDP starts to rise again in May and June. That said, it is clear that the lockdown will be eased only gradually and that social distancing measures will prevent businesses from producing as much as usual and households from spending as much for many months yet. As such, GDP may stay further below normal for even longer than we have already assumed. In other words, there’s a risk that the economic recovery looks less like our “long tick” forecast and more like a “U”.