High frequency indicators start to show virus impact - Capital Economics
UK Economics

High frequency indicators start to show virus impact

UK Economics Update
Written by Andrew Wishart

The high frequency indicators we track show that the spread of the coronavirus is already having an impact on the economy. There is no doubt these activity indicators will deteriorate further as the government’s measures to contain the virus become stricter. Their real value will be showing us how quickly the economy is recovering from the guaranteed huge fall in activity in Q2.

  • The high frequency indicators we track show that the spread of the coronavirus is already having an impact on the economy. There is no doubt these activity indicators will deteriorate further as the government’s measures to contain the virus become stricter. Their real value will be showing us how quickly the economy is recovering from the guaranteed huge fall in activity in Q2.
  • The coronavirus pandemic is at an earlier stage in the UK than in China, Italy or France. But the trajectory of the death toll suggests the outbreak will eventually be just as severe. (See Chart 1.) The UK government has already advised the public to avoid trips to restaurants, bars, theatres and all other non-essential social contact. Yesterday it decided to close schools indefinitely from Friday and there are rumours of a London lockdown. Whatever the exact measures, they will only get more stringent in the coming weeks.
  • The effect of existing measures has already started to show up in the high frequency indicators of activity we track. On Wednesday, the number of people dining out was down 91% on a year earlier. (See Chart 2.) Cinema ticket receipts were £5.6m last weekend, down 56% on a year earlier. (See Chart 3.) And retail sales were down 11% y/y last week. (See Chart 4.) These charts and more are updated daily on our website.
  • All these measures will deteriorate further. In Italy and China, cinema takings have fallen to zero. And surely it won’t be long until no one in the UK is eating in restaurants. Retail sales might fare a little better due to online sales, and in the near term because of stockpiling of food and other essential items.
  • The unprecedented shutdown in service sector activity is why we expect the fall in output in this recession to be particularly large. After pencilling in large falls in activity in sectors where activity could almost cease entirely, we arrived at a fall in GDP of 15% q/q in Q2. (See here.) That would be the largest peak-to-trough fall in output in modern history – GDP fell by 6% in the financial crisis and 8% in the Great Depression.
  • Overall, we know that these indicators are going to get worse. Their real value will be showing us how quickly the economy is getting back to normal after the virus is under control. We expect the recession will be short-lived and the recovery will be fairly fast. These indicators will help us judge if we are right.

Chart 1: COVID-19 Deaths (Number, T=10)

Chart 2: Number of People Dining Out (% y/y)

Chart 3: Cinema Ticket Sales (Per Weekend, £m)

Chart 4: Retail Sales (Per Week, % y/y)

Sources: WHO, John Hopkins, OpenTable, IMDb, Springboard


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