The UK’s vaccine rollout has been impressive to date, with the government this week reaching its goal of two million in a single week. This would leave the UK on track to meet its ambitious target of vaccinating 15 million people by mid-February, although there is still plenty of scope for setbacks to that aim. Infections (and possibly new hospital admissions) appear to have already peaked.
However, new infections are not falling as quickly as expected due to the new strain, but also reports of non-compliance with the rules. The number of patients in hospital is still rising, as is ventilator bed use and deaths…
Thinking from the government seems to be leaning towards delaying an easing until April. The picture could yet change, but we are lowering our 1Q GDP forecast from -3.6% to -4.1%q/q (i.e. from -13.5% to -15.5% annualized) in expectation of a post-Easter easing. This is a delay of around a month, and would leave the recovery from 2Q broadly intact.
While it appears unlikely there will be a big bang approach to easing after Easter, we continue to expect the economy to make a rapid recovery with a 6%q/q (27% annualized) gain in 2Q. We also expect activity to reach broadly the same level as before at the end of this year – with the economy returning to 4Q19 levels by early next year.
Our full year 2021 forecast is now 5.2%, instead of 5.5%.