U.K. Recession Will Be “Worst in 300 Years.” The U.K. is entering a recession that will contract its GDP by as much as 30 percent for the first half of this year, the Bank of England has forecast, marking this as the worst recession since the “Great Frost” in 1709.
The economy shrank by 3 percent during the first quarter and will lose another 25 percent during this one, the bank expects. Household spending already has dwindled by 25 percent since March.
The bank will not launch additional stimulus measures now, it said, because its’ March program to buy £200 billion in government bonds was still under way.
Commercial banks must not try to conserve capital by restricting their lending, warned Andrew Bailey, the Bank of England’s governor. If the banking system keeps making a steady supply of loans, “we’ll have a better outcome,” he added.
Bailey also said again that his bank will “do what it takes to support the economy” if additional stimulus is warranted and stated again the bank’s expectation of a V-shaped recovery.
TREND FORECAST: Forecasts of a V-shaped recovery are made by Pollyannas. The loss of jobs and income, and fear among millions of others they could suffer the same fate, will add a new urgency to saving money and pruning needless spending.
Any economic recovery might begin with a slight surge but then will gather strength slowly over many months.
Germany in Recession. Germany’s economic output dwindled by 2.2 percent in the first quarter of this year, triggering a recession after the country’s GDP dipped 0.1 percent at the end of 2019.
A recession is defined as two consecutive quarters of economic contraction.
The contraction was the second worst since Germany’s 1990 reunification, exceeded only by a 4.7-percent slide in 2009’s first quarter during the Great Recession.
Germany’s Federal Statistics Office showed a 15.6-percent fall in factory orders in March, the month the lockdown began, compared to a year previous. Industrial production was off 9.2 percent and exports pulled back by 11.8 percent, the most since 1990.
Germany’s economic shutdown was less severe than those in France, Italy, or Spain and German shops, restaurants, and auto factories are reopening.
Still, second-quarter figures are expected to be much worse than the first’s, in part because unemployment is still rising, the economy is still partly locked down, and many of Germany’s export customers are not yet back in business.
TREND FORECAST: We have provided economic data in previous issues of the Trends Journal showing that all of Europe and most of the world has, or will, decline into recession and then into the “Greatest Depression.”
It must be noted that Germany’s economy was slipping into recession in 2019. COVID economic lockdowns did not begin until March. Thus, with many business and social restrictions being imposed by politicians in the unlocking of their economies, it will do nothing to avert the economic disaster ahead.
TREND FORECAST: As we have noted in this and other issues of the Trends Journal, the travel/hospitality sector will dramatically decline well into 2021. This particularly will be devastating for nations that rely on travel and tourism, putting countless businesses and hundreds of millions out of work… in addition to all the sectors supporting those businesses, from food service to air and ship builders.
