Britain's economy faces long road back to its pre-Covid size economists warn, as rising unemployment, post-Brexit trade tariffs and possible second wave loom

To gauge the present state of the economy, one can look at a series of other indicators aside from GDP, including:

Mortgage approvals: The number of loans handed out to home buyers are an indication of how much banks are lending and how confident potential buyers are. Low mortgage approvals may indicate banks are worried about people losing their jobs and being unable to pay them back. 

According to the most recent Bank of England stats, approvals for home mortgages bounced back to 40,000 in June, up from the record low of 9,300 in May, but still below February’s pre-Covid level of 73,700. 

House prices: There are several reasons why rising house prices are not necessarily an indication of a healthy economy. For example, a shortage of supply, Government help and low interest rates can contribute to inflate prices, as it's been the case in the UK for the past years. 

However, in theory, they also tend to rise if more people want to buy homes, which means people ultimately expect to be able to afford them, which in turn means they are in work and earning enough - a sign of a healthy economy.

The coronavirus pandemic has seen housing transactions nearly grind to a halt, making it difficult to produce an accurate measure of house prices. However, Halifax said house prices recovered to hit their highest levels on record in July. But this 'mini-boom' is likely only linked to released pent-up demand and people taking advantage of a stamp duty holiday. 

Retail sales: The amount of products sold by shops and supermarkets indicate whether people are spending money or not. Sales of clothes and other non-essential products are the first to be hit when people struggle financially and rein in spending. 

Which is in part what has been happening over the past years, as households' finances have been squeezed as wages failed to grow. During the coronavirus crisis, retail sales slumped, but that's also because many shops were shut down. It needs to be seen how willing consumers will be to spend over the coming months as more people lose jobs.

Services, manufacturing and construction purchasing manager indices (PMIs): These are monthly surveys in which supply managers in companies of each sector are asked about new orders, inventory levels, production and employment. They are asked about whether things are improving or deteriorating, hence providing a picture of the current state of their sector.

For this reason, PMIs are early indicators, tending to precede changes in the trend in other major economic indicators like GDP or unemployment.     

Holiday and flight bookings: As with buying clothes, people are unlikely to splash out on holidays if they don't have much money or fear for their finances. Holiday bookings have been hit badly during the pandemic as holidaymakers were forced to stay put to prevent the spread of Covid-19. 

Future bookings will depend on whether people feel comfortable to travel as much as they did in the past, and whether they will have the money to do so. A second wave and new lockdowns will also hit bookings. 

Most airlines have warned it may take at least a couple of years for passenger numbers to return to pre-Covid levels. Holiday Inn owner IHG, which has hotels around the world, last week said demand begun to pick up, but less then half rooms were occupied last month.

Car sales: Car sales have been falling due to low consumer confidence. If people do not feel confident about their future prospects, they will not splash out on cars.

The UK is on course to produce just over 880,000 new cars this year - a decline of a third compared to 2019, according to the latest available data, and the lowest output since 1957.

Britain's economy contracted by 20.4 per cent in the second quarter, the largest quarterly decline since comparable records began in 1955.

The contraction is also significantly larger than falls in the eurozone, which saw a decline of 12.1 per cent, and the US, whose economy shrank by 9.5 per cent in the three months to June.

Over the first half as a whole, the UK economy saw the biggest contraction of all G7 economies at 22.1 per cent, more than double the 10.6 per cent fall in United States and close to double of Germany's 11.6 per cent decline.

The UK economy saw the biggest contraction of all G7 economies over the first half

Samuel Tombs at Pantheon Macroeconomics has blamed the Government's slow response to Covid-19 for the depth of the UK's second-quarter contraction.

He said: 'The long duration of the lockdown in the second quarter, due to the Government's slow response to Covid-19 in March, followed by its failure to prevent the virus from spreading from hospitals, was at the root of the economy's under-performance in the second quarter.'

Rachel Winter, Associate Investment Director at Killik & Co, says it's partly because of the UK's reliance on the services sector - which was one of the worst affected as restaurants and bars had to remain closed during lockdown.

She said: 'A drastic fall in output for the second quarter was to be expected given the restrictions that remained in place throughout those three months.

'The UK derives about four fifths of its GDP from the services sector, which includes many types of businesses that have been unable to operate during lockdown. Examples include retail, hotels, restaurants, and live events.

'Our dependence on the services industry is one reason why our fall in output has been relatively severe compared to other major European economies.' 

Mariano Mamertino, senior economist at Linkedin, says the second quarter slump was deeper than other EU nations partly due to the timing of the lockdown.

'The UK has experienced one of the biggest growth contractions over the last quarter. This is in part because the UK locked down later than other European nations, and so makes today's figures even starker,' he said.