Economic Perspectives –

Coronavirus crisis: GDP recovers further in July

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest GDP data and other economic data.


14th September 2020


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest GDP data and other economic data:

  • GDP rose 6.6% (MOM) in July, following growth of 8.7% in June and 2.4% in May. Despite this, July’s level was still some 11.7% lower than in February 2020.
  • Services output grew by 6.1% (MOM) in July, after growth of 7.7% (MOM) in June, but was still 12.6% lower than in February 2020.
  • Within services output, “accommodation and food services activities” were still down 60% on February’s level in July, whilst “arts, entertainment and recreation” were down over 31% and “human health and social care” were down nearly 26%.
  • Production output grew 5.2% (MOM) in July (but was 7.0% down on February), within which manufacturing grew 6.3% (MOM) (but was down 8.7% on February).
  • Construction recovered by a further 17.6% (MOM) in July, but was still 11.6% lower than in February. 
  • The total trade balance (goods and service) showed a surplus of £12.0bn in the three months to July, as the services surplus more than offset the goods deficit.
  • According to the Halifax, house prices jumped 1.6% (MOM) in August, to be 5.2% higher YOY, and were at a record high. The market is partly driven by pent-up demand, the demand for bigger properties and the temporary cut in stamp duty.

Concerning central banks:

  • The ECB left policy unchanged at its September meeting. There was a modest upgrade to its GDP forecast for 2020; the ECB now projects a fall of 8.0% in 2020, compared with 8.7% in June.
  • The Bank of England is meeting next week. There are few expectations of any policy changes. But the MPC minutes should provide further indications of the Bank’s thinking on economic developments and monetary policy in the light of the recent cautious statements from the Governor and other Bank officials. 
  • The Fed is also meeting next week. This follows the recent change in its monetary policy framework, when it switched to an “average” inflation target from a “point” inflation target.

Brexit update:

  • Round 8 of UK-EU future relationship negotiations took place on 8-10 September; there seemed to be little progress. Informal talks continue this week. The Prime Minister’s deadline for an agreed trade deal is 15 October.
  • The Government presented the Internal Market Bill last week, which seeks to amend aspects of the Northern Ireland Protocol (part of last October’s Withdrawal Agreement). The aspects are: checks on goods moving from NI to GB; operation of tariffs on goods from GB to NI “at risk” of entering the Republic; and state aid.  

Ruth Lea said: “July’s data suggest that the recovery to date has been, very broadly, a 'V' shaped recovery, which is encouraging. But with the withdrawal of Government schemes in coming months, not least of all the Coronavirus Job Retention Scheme at the end of October, unemployment is expected to rise significantly, which will surely dampen activity. There are clearly risks that the recovery could falter, and the new meeting restrictions, implemented on 14 September, can only add to the risks.”





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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