All-Sector PMI & GfK Consumer Sentiment (Mar.) - Capital Economics
UK Economics

All-Sector PMI & GfK Consumer Sentiment (Mar.)

UK Data Response
Written by Andrew Wishart

The incoming data continue to confirm that the UK is destined for the sharpest fall in economic output for over a century in Q2. And the collapse in consumer confidence to its lowest since 2009 suggests that generating a strong economic recovery may not be as simple as ending the lockdown.

More confirmation that social distancing is obliterating economic activity

  • The incoming data continue to confirm that the UK is destined for the sharpest fall in economic output for over a century in Q2. And the collapse in consumer confidence to its lowest since 2009 suggests that generating a strong economic recovery may not be as simple as ending the lockdown.
  • We already knew that the composite activity PMI, which covers the services and manufacturing sectors, hit a record low of 36.0 in March. Today we found out that social distancing has also put the handbrake on construction activity, with the construction PMI falling from 52.6 in February to 39.3, the lowest since 2009. That left the all-sector PMI at 36.3, down from 53.0 in February and consistent with quarterly GDP growth of between -2% and -2.5%.
  • Note that the survey doesn’t include the retail sector, which has done even worse judging by footfall data (except for supermarkets). And the PMI is pretty much guaranteed to deteriorate further in April as the full effect of the lockdown is captured. Even then, we doubt it will capture the true scale of the loss of economic activity. We are currently forecasting a 15% q/q fall in GDP in Q2 but if anything, it could be larger.
  • Other data released this morning were equally bleak. Car registrations are usually high in March due to the bi-annual plate change system. They fell 44.4% y/y from 458,000 in March 2019 to 255,000 in 2020. That was lowest figure for March since the late 1990s, as coronavirus caused showrooms to close.
  • Perhaps most worryingly, the GfK’s “flash” measure of consumer confidence fell from -7 in February to -34 in the second half of March (data collected between 16th & 26th), the lowest reading since 2009 and consistent with household spending falling sharply. (See Chart 1.) The economic outlook and major purchases balances both fell to record lows. (See Table 1.)
  • That, alongside the experience in China, suggests it may take time for consumers to start spending again after the lockdown ends, making the eventual recovery from the coronavirus recession more protracted than we initially envisaged.

Chart 1: GfK Consumer Confidence & Household Spending

Source: Refinitiv

Table 1: UK Economic Sentiment Indicator (Seasonally Adjusted)

Jul

Aug

Sep

Oct

Nov

Dec

Jan-20

Feb

Mar

Previous Record Low

Date

Composite Index

-11

-14

-12

-14

-14

-11

-9

-7

-34

-39

Jul-08

Economic sit. over next 12m

-32

-38

-35

-37

-34

-27

-24

-21

-56

-52

Jul-08

Own finances over next 12m

-1

-2

-2

-2

-1

-1

-1

-1

-17

-18

Jul-08

Climate for major purchases

4

1

3

1

0

3

1

6

-52

-43

Oct-08

Sources: GfK, Refinitiv


Andrew Wishart, UK Economist, +44 7427 682 411, andrew.wishart@capitaleconomics.com