IHS Markit flash PMIs signal slowing economic growth momentum in Dec

Overall manufacturing output rose, supported by an easing of supply constraints across Western economies, which also suggested that we may be seeing prices peaking in these regions.

Service sector growth, meanwhile, came under pressure as the growing COVID-19 wave struck the United States, the United Kingdom and eurozone, while Japan saw service sector activity growth slow post the initial reopening boost.

The latest COVID-19 Omicron variant developments add further downside risks to the year-ahead outlook, IHS Markit said in a press release.

Flash PMI surveys for December signalled a slowdown in the pace of economic growth in all four of the world's largest developed economies. While still solid, the weighted average PMI output index for the United States, Eurozone, Japan and the United Kingdom stood at 54.7 compared to 55.9 in November, signalling the slowest growth recorded since September.

Economic growth was weighed down primarily by slower service sector activity growth, though manufacturing growth also remained subdued relative to the strong gains seen earlier in the year, IHS Markit said.

A renewal of COVID-19 case growth in Western economies into the closing months of 2021 has affected service sector activity in December, with the European economies in particular finding their latest flash composite PMIs sliding further from their summer peaks, reached as the economies opened up from pandemic-related restrictions.

Eurozone growth notably fell to a nine-month low in December with the German economy stalling for the first time in a year-and-a-half. UK growth likewise slumped to the slowest since the lockdowns at the start of the year.

While the surge in cases remain a Delta-variant-driven phenomenon, the spread of the Omicron variant has induced additional caution and poses an increased threat to the growth outlook, IHS Markit said.

The December surveys showed demand growth across the UK and eurozone easing to the slowest recorded since February and March respectively, which was when COVID-19 disruptions first started easing towards the start of this year, with weakness led by renewed falls in activity in consumer-facing sectors such as recreation and tourism.

A more modest easing in output growth was seen in the US, which even recorded a faster rate of new orders growth in December, largely reflecting lower virus containment measures than seen in Europe. The rate of expansion nonetheless slipped in the US to the weakest for three months.

Meanwhile, APAC economies, including Japan and Australia, had similarly seen private sector output growth slow from November. The difference to note, however, had been the fact that both countries only recently saw their output growth revive as the Delta wave eased and the economies reopened, IHS Markit added.

ALCHEMPro News Desk (DS)