UK-NowNat: expected recession for 2020

Even with better PMIs in May , our nowcasting model UK - NowNat has strongly revised down its forecast s for the United Kingdom growth outlook for the first half of 2020, mostly due to a plunge in the Index of Services (-6% from February to March). Our model expects the recession to last well into the second half of the year: -3.5 % sequential growth for Q 1 20 20, -3.8% for Q 2 2020 and -1.7% for Q3 2020. We would stress, however, that our model necessarily underestimates the economic damage done by the confinement measures, which are unprecedented and therefore hard to “understand” for our model. The model probably also underestimates the massive policy action put in place to stabilize the economy and to prepare the rebound in activity. Thus, our model (and other models relying on past data) need to be treated with caution given how extraordinary the current situation is .