Despite the initial anticipation of the impact of the coronavirus pandemic to Britain`s economy, consumer spending has been rising significantly.
The Bank of England suggested that Britain`s economy has recovered more quickly than expected from the worst downturn since 1921 – when unemployment and depression surged after the first world war. However, increasing unemployment and falling GDP still remain a matter of concern.
According to James Smith, the research director at the Resolution Foundation, the government still has to come up with a quick strategy to protect jobs and assist people who are being made redundant.
“While today’s forecasts from the Bank of England now point to a smaller initial economic hit from the coronavirus crisis than it predicted back in May, they still make troubling reading with the UK expected to see the largest fall in GDP among rich countries,” he said.
Following the emergency action in March to reduce interest rates to the lowest level in its 326-year history, the Bank`s nine-member monetary policy committee (MPC) had agreed unanimously to keep rates fixed at 0.1 per cent.
The Bank said that the payments data had revealed that in the month of July household spending was less than 10 per cent below its level at the beginning of the year, reflecting faster economic recovery as lockdown measures are eased out.
Andrew Bailey, the Bank`s governor, said: “The outlook for the UK and global economies remains unusually uncertain. It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these.”
The government`s furlough wage subsidy scheme had enabled several people to retain their jobs, the Bank said. However, it warned that many jobs would be lost as the furlough scheme is wound down.