GDP fell by 20.4% on a quarterly basis in Q2, while the economy was 21.7% smaller than the same period a year earlier. This actually represented better performance than expected by some projections. However, while a recession on this scale was widely anticipated, it should not be underestimated. This is the deepest recession since official records began, driven by a similar drop in household consumption during lockdown.

However, as the economy has started to reopen, the recovery has begun. Monthly GDP grew by 2.4% in May and 8.7% in June. As long as the UK avoids a damaging second wave of COVID-19 infections resulting in another national lockdown, this growth is expected to continue and restrict the recession to the first half of the year.

At first glance, ONS data suggests that the anticipated negative impact of COVID-19 on jobs simply hasn’t happened, as official unemployment remained at 3.9% in Q2. However, this is largely a product of definitions and the particular nature of job losses during lockdown.

A more detailed look at the ONS data shows that the number of people classified as employed fell by 220,000 in the three months to the end of June. However, many people laid off during lockdown have not immediately begun looking for new work, resulting in a rise in economic inactivity, rather than unemployment.

Despite the huge drop in output, consumers’ financial wellbeing hit an index high in June, and remained high in July. Job losses have disproportionately hit the youngest and oldest groups, and part-time workers. These people are likely to have fewer serious financial commitments, and so the repercussions from a period of joblessness are reduced. At the same time, reduced lockdown spending has boosted the household finances of consumers able to maintain most or all of their income.

Consumers’ measure of changes in household finances over the last year, and confidence for the year ahead, have also improved in the last couple of months. With the economy reopening to something approaching normal, consumers have good reason to think the worst is over. However, there remain serious threats to household finances, not least the winding down of the Coronavirus Job Retention Scheme over the coming months.