How long will the recession last, and how should you invest?

Linda J. Dodson

How long will the recession last and how bad will it be?

Despite the dire headline economic figures, the economy is already showing signs of recovery. Monthly output in June surged by 23.5pc, also a record, which leaves output down by just under one quarter compared with February’s level.

Although the economy is still 17.2pc below pre-pandemic levels, it grew by 8.7pc in June. 

Economic forecasts for the rest of the year and into 2021 vary. The International Monetary Fund said this year would be the worst global economic collapse since the Great Depression of 1929 and Britain’s economy would contract by 6.5pc.

Paul Dales, of consultancy Capital Economics, was positive on the prospects of a quick economic recovery so long as the virus is contained. “That means the extremely large contraction in spring will be followed by reasonably large growth for the remainder of the year and into 2021. This recession will be deep, but short,” he said. 

This is known as a V-shaped bounce, because when economic growth is plotted on a chart there is a sharp decline followed by an equally sharp rise.

For Ms Suter, a second wave of the virus will hamper any rebound, as will the effect of some of the localised shutdowns we’ve seen in recent weeks.

“The much-talked-about V-shaped recovery of the British economy relies on no second lockdown and also on British trade talks being successful – presenting two large uncertainties,” she said.

Karen Ward, of American bank JP Morgan, said the severity will depend on how quickly the disease is contained, the resilience of the global economy and the response from governments.   

Shamik Dhar, of BNY Mellon Investment Management, said we are probably past the worst for the economy given that growth rebounded in June. He expects strong growth of over 10pc in the third quarter of the year as there is significant pent-up demand.

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