The green shoots of recovery or the day a V-shaped recovery died?

What colour glasses are you wearing today? Depending on the tint, there are two quite distinct ways of looking at May’s growth figures which showed a small monthly increase of 1.8%.

If you are wearing dark glasses, you will be ready to jump off a cliff because the economy grew more slowly than predicted. In the words of Sky New’s economics editor, Ed Conway, was “today the day the dream of a V-shaped recovery truly died?”

It is true the figures were disappointing when the consensus view among economists had been for growth of around 5 % at the lower end.

When you compare the three months of the year – March, April and May – this year to last year’s period, economic activity is down by 18.6% in real terms. Taken together, the figures show the UK economy is now 24.5% smaller than it was in February. By any comparisons, this is horrendous.

Yet if you were to change your glass tint to pink, and are of a more sunny disposition, you might see today as the day the economy grew again by 1.8% after nearly two months of the most severe restrictions that have been placed on Britain in modern times. In normal times, that sort of monthly growth would be considered good.

That the numbers are disappointing is hardly surprising. You can also argue that it is astonishing the economy grew at all after the 20.4% drop in April when consumers were paralysed by the virus and the country was in deep cold storage.

The latter view is certainly my take on May’s figures because if you look back at that time, apart from key industries, most of us were still living in a semi-zombie world in which consumer spending was constrained to mainly food, wine and perhaps garden plants.

There’s another positive factor to take into account – the ONS numbers are notoriously downbeat and often revised upwards. Add into the mix the fact that collecting figures during this bizarre period of inactivity means that even the ONS may not have the complete picture.

What the ONS figures for May do show is that the main powerhouses of the economy – manufacturing and construction – were firing again. The manufacturing sector jumped by 8.4% on the month while construction grew by 8.2%. This is a good sign although the climb back was from a terrible base: the output of these sectors’ output was 21.6pc and 39.9pc below their respective January levels.

Of the slightly more optimistic school is Azad Zangana, senior European economist at Schroders, who says the figures show that the UK economy started its journey on the long road to recovering in May. He also points out there were some bright spots in the otherwise hugely depressed services sector, particularly in accommodation and food services which are now down by 92% since February.

For example, services sub-sectors, wholesale and retail etc, saw the best improvement, up 13% over the month, although others such as real estate were still down. Zangana adds that next month’s GDP figures for June are likely to show an acceleration in growth as more retailers and offices returned to work in June.

There are other tentative signs that May was a turning point on the road to recovery rather than an ominous signal indicating that recovery is going to be of the L-shaped variety than the much-hoped for V. Going against the grain of opinion, Andy Haldane, the Bank of England’s chief economist, recently suggested that earlier figures for June were pointing towards a faster and more bouncy V-shaped return to some sort of normality.

Haldane’s view was given more credence today by figures from the British Retail Consortium, the retail trade association, and KPMG, the accountant, which showed that retail sales rose by 3.4 % in June. In May, sales had fallen by 5.9%. This was the first time that retail sales have grown since the lockdown was first imposed at the end of March, and at their fastest rate since May 2018.

Helen Dickinson, BRC chief executive, says the growth in sales was partly driven by the rise in online sales during lockdown but a slow return by shoppers to the high street too. Analysts were quick to suggest that the BRC data showed the sales recovered fully to their pre-covid levels in June, and that year on year growth sales values were back up 5.4% in June from -9.2% in May.

As most of us could have predicted, the worst hit were non-food retail sales, down 15% over the three months to June. But again, as most consumers can testify, food sales rose by 3.8%.

Definitely wearing dark glasses are the officials at the Office for Budget Responsibility who are even gloomier than they were in April, warning once again the UK is on track to record the largest annual decline in GDP for 300 years.

Today they set out three potential scenarios for the UK economy: upside, central and downside but all the scenarios start with the premise that output will fall by more than 10% in 2020.

More pertinently, the OBR warns that the coronavirus pandemic had “materially altered” the outlook for the public finances, and predicts the government is on course to borrow £372bn this year to pay for the shortfall between tax revenues and public spending.

This includes extra borrowing to pay for the chancellor’s latest £30bn emergence package to protect and create jobs and boost the economy but it will push the UK’s total debt pile to 104.1% of GDP.

And there may be more calls on spending to come. The OBR’s outgoing chairman, Robert Chote, makes the point that there might need to be higher spending on the NHS and on Universal Credit should unemployment soar to the levels being predicted. Even with Rishi Sunk’s recent jobs package, the OBR reckons unemployment could rise to a record 12% by the end of this year, tailing back to 10% next year.

Just to cheer you up even more, the OBR warns the government has two choices: cut  public spending – in other words back to austerity – or raise taxes to fix the damage.

However you look at this prognosis, it’s far too early to know just how deep the scar of the virus has already left on the economy and will in the long-term.

There are some industries from airlines to hospitality to tourism which may be damaged, or certainly changed, forever. Then you have the added costs for business – and particularly small businesses – of all the paraphernalia that goes with protecting staff and customers from the virus ranging from perspex screens to visors and masks. That is a hidden cost which we have yet to see quantified on top of the loss of sales from fewer clients and lower footfall.

So much of how, when and, indeed, if the economy bounces back, depends not only on that fateful expression – consumer confidence – but also more worryingly, on whether there will be another serious outbreak this autumn.

If the Academy of Medical Sciences is right in its diagnosis of what a worst case “bad winter” could look like with a new wave of coronavirus infections, then we could be in for up to 120,000 deaths.

In its report out today, the Academy warns that the combination of a backlog of patients needing NHS assessment and treatment, and the possibility of another flu epidemic, would be disastrous and that the government must start preparing now for a September outbreak.

The report, which was commissioned by Sir Patrick Vallance, the government’s chief scientific adviser, says the new pressures are on top of the challenge winter usually presents to the NHS, when other infectious diseases are more common and conditions such as asthma, heart attack, chronic obstructive pulmonary disease and stroke tend to worsen.

The “Preparing for a challenging winter 2020/21” report argues that “intense preparation” is needed now throughout the rest of July and August to reduce the risk of the health service being overwhelmed and to save lives this winter.

Some of the Academy’s recommendations are pretty obvious and include minimising transmission of coronavirus in the community, with a public information campaign for all, as well as advice tailored to individuals and communities at high risk.

It also suggests reorganising health and social care staff and facilities to maintain Covid-19 and Covid-19-free zones, and ensuring there is adequate PPE, testing and system-wide infection-control measures to minimise transmission in hospitals and care homes.

Most essential of all, says the Academy, is establishing a comprehensive, near-real-time, population-wide surveillance system to monitor and manage a winter wave. That’s the key. If the authorities can protect the most vulnerable parts of the population – the elderly and those with existing illnesses – from future outbreaks by implementing local and regional lockdowns, then maybe we can survive another winter wave.

To mount such a coordinated campaign off the ground, the government needs to step up its war-games. Boris Johnson and his Cabinet have to forget the summer holidays and start work with a strategic task-force to bring together all the UK’s various authorities and institutions – from volunteer groups to local resilience forces organised by the army – ready for the autumn. If Britain can do that, then it might just be we can protect the nation’s health – but also wealth.