How are we monitoring the economy during the Covid-19 pandemic?

The purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision.
Published on 21 May 2020

We have been using a wider range of indicators than usual to help monitor the economy recently, including timely data on spending, travel and internet searches. These indicators point to a very sharp reduction in activity since March.

The spread of Covid-19 and the measures to contain it have significantly reduced economic activity in the UK. Official data are only available with a lag, so we are using timelier indicators to help estimate the size of the fall.

Monthly business surveys suggest large numbers of firms are producing less. Although these surveys tell us how widespread falls in output are, they are less informative about the magnitude of the decline. So we are also using a wider range of measures to help monitor economic activity. These include the high-frequency indicators shown in Chart A, as well as card payments data and new weekly surveys of businesses and households.

Indicators for activity involving social interaction and travel have fallen sharply since early March. Retail footfall was 80% lower by the end of March compared with a year earlier; dining in restaurants stopped completely. The number of flights leaving UK airports has fallen by around 90% and travel within the UK has also declined sharply. Card payments data and internet searches also suggest spending on non-essential products has fallen.

Chart A High-frequency indicators show a rapid decline in economic activity since early March

High-frequency indicators of economic activity(a)

Sources: Department for Transport, Google Trends, OpenSky Network, OpenTable, ShopperTrak and Bank calculations.

(a) Data are shown to 5 May unless otherwise stated and are not seasonally adjusted. Road and rail travel data are shown relative to normal levels. All other data are shown relative to a year earlier.
(b) Seven-day moving averages of flight departures tracked by the OpenSky Network from Birmingham, Gatwick, Heathrow, Luton, Manchester and Stansted airports.
(c) Google searches data are weekly averages of the Google Trends index of UK search volumes. Data are to the week beginning 3 May. Searches for cars shows the average of changes in search volumes for the six highest-selling car brands in the UK.
(d) Weekly changes to 14 March and daily thereafter to 2 May. Data have been adjusted to remove distortions caused by bank holidays.

At the time of the May Monetary Policy Report, based on all the available evidence, we expected the level of UK GDP to be almost 30% lower in 2020 Q2 than it was at the end of 2019. That estimate was highly uncertain however, as it was sensitive to the evolution of the pandemic and any changes to social distancing practices.

This post has been prepared with the help of colleagues in Advanced Analytics, Current Economic Conditions and External Engagement Divisions.

This analysis was presented to the Monetary Policy Committee as part of its May 2020 round.

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