Economies are recovering, but activity is still well below its pre-pandemic peak, next week’s figures should show.
The Office for National Statistics is likely to report that real GDP rose again in August, helped by the Eat Out to Help Out scheme and VAT cut boosting demand in the hospitality sector. This will put us on course for a record-breaking jump in GDP in the third quarter.
However, the level of GDP is likely to still be more than 5 per cent below its pre-pandemic level. And purchasing managers’ final survey for September is likely to show that growth in the services sector is now slowing. With the new restrictions now curbing activity, such numbers will fuel fears that the upturn is running out of steam and that unemployment will rise sharply when the furlough scheme ends later this month.
We’ll see a similar story in the eurozone. Official figures from France, Germany and Italy will show that although industrial production has risen nicely in recent months, it is still significantly below pre-pandemic levels – which themselves were mediocre after months of stagnation.
And the non-industrial sector is doing no better. Purchasing managers are expected to confirm that services activity fell in September. And official numbers could show that retail sales in the region are below June’s levels. That suggests that post-lockdown boost to sales caused by the release of pent-up demand has faded away.
All these numbers come before a likely second wave of the virus. They will therefore fuel fears that the pandemic has done long-lasting damage to economies, and that considerable policy help will be needed next year to boost activity and create jobs – help which cannot be confined only to monetary policy.
One exception to this downbeat picture will, however, be the UK housing market. The Halifax could report another rise in prices in September, taking them to more than 5 per cent about last year’s levels. This reflects the release of pent-up demand and the effect of the stamp duty cut.
Economists, however, doubt this can last. Falling employment and real wages, plus a lack of affordability, must hold prices down eventually.
