Business sentiment indicators rebounded strongly following the first full lockdown last year. Numerous surveys posted figures higher than their pre‑lockdown levels. As surprising as this was given the severity of economic impacts wrought by covid lockdowns, many sentiment surveys have struggled to maintain these initial highs. Stronger economic undercurrents published in subsequent data releases highlight some of the eventual misalignment between early sentiment surveys and lagging economic data, in what was a highly unusual year. With renewed restrictions on economic activity from repeat lockdowns, it is expected that sentiment and economic activity measures will face ongoing pressure well into 2021. Current and ongoing vaccination programmes provide hope for some bounce-back in the economy. However, the end of the Brexit transition period brings inescapable uncertainty on a number of levels.

The UK’s GDP yearly growth rate of -8.6% at Q3 2020 recovered from its largest ever fall, posted in the second quarter. Similarly, using historical comparisons, the quarterly growth at Q3 posted its largest ever gain at 16%. But the context of this is important, given the size of the decline in Q2 2020 and the impacts from the first lockdown. Latest GDP data suggests that the UK is set for a double-dip recession as subsequent lockdowns further dent economic activity.

Read more…