Well, do you want the good news or the bad news?
The goods news – both for the UK and for the rest of Europe – is that the worst is over. April marked the bottom of the slump triggered by the response to the Covid-19 pandemic. Provided there is no second wave of infection (a pretty hefty qualification, admittedly) last month was as bad as it gets.
The bad news is that a return to pre-crisis levels of activity is a long way off and, as things stand, will be measured in years not months. There is more chance of spotting a yeti in the Himalayas than there is of a sighting of the equally elusive V-shaped recovery.
Some businesses in the UK are starting to reopen, but the process is a slow one. The Office for National Statistics says that of the companies trading in late April and early May, 6% had reopened in the previous two weeks.
This fits with anecdotal evidence. There are more cars on the roads, more cafes and restaurants are offering takeaway services, factories have resumed production with skeleton staffs.
It also chimes with the latest purchasing managers’ indices (PMIs), which have bounced off the historic lows plumbed in April. In the UK, the PMI rose from 13.8 to 28.9; in the eurozone it increased from 13.6 to 30.5.
Any reading below 50.0 is supposed to represent economic contraction, so on the face of it that means activity is still falling in May, but at a slower pace than in April. That doesn’t smell right: lockdown restrictions have been eased and that will have boosted output.
Samuel Tombs, UK economist at the economic consultancy Pantheon, has tentatively pencilled in a rise in gross domestic product of 3% in May following a 20% fall in April. That seems more like it.
For now, the economy remains on government-provided life support. Of those firms that have temporarily closed, 91% have furloughed staff, 70% have deferred VAT payments and 62% have taken advantage of the business rates holiday. Only 11% of shuttered businesses are certain their cash reserves will last for more than six months.
Hence Rishi Sunak’s keenness to get more of the economy opened up in the coming weeks. The other piece of good news for the chancellor is that steadily falling trend in the growth of new Covid-19 cases should allow the government to further relax lockdown restrictions.