Home breadcru News breadcru Policy breadcru UK flash PMI signals economic slowdown as Omicron hits: IHS Markit

UK flash PMI signals economic slowdown as Omicron hits: IHS Markit

21 Dec '21
3 min read
Pic: IHS Markit
Pic: IHS Markit

The IHS Markit flash purchasing managers’ index (PMI) data show the UK economy being hit once again by COVID-19, with growth slowing sharply at the end of the year led by a steep drop in spending on services by households. Some brighter news came through from manufacturing, where an easing of supply chain delays helped lift production growth.

With COVID-19 infections set to rise further in coming weeks due to the spread of the Omicron variant, and more restrictions being introduced, the pace of economic growth looks likely to continue to weaken as the country heads into 2022, IHS Markit said in a press release.

The bigger uncertainty will be on how rising global infection rates might cause further supply and labour shortages, and whether this means the easing of inflationary pressures seen in December proves frustratingly short-lived, it said.

The UK economy is ending 2021 on a disappointing note, with the pace of growth slowing sharply in December as COVID-19 worries once again disrupt business activity.

The IHS Markit-Chartered Institute of Procurement and Supply (CIPS) composite PMI output index, covering both services and manufacturing, fell from 57.6 in November to 53.2 in December, according to the early 'flash' reading, indicating the slowest rate of expansion since the lockdowns at the start of the year.

The slowdown reflected a sharp weakening of service sector growth to the slowest in ten months, attributed primarily to rising COVID-19 case numbers and growing concerns over the Omicron variant.

Health worries and new restrictions were often reported to have deterred spending, both by businesses and households, causing service sector new business to expand at the slowest pace since the recovery began in March.

Growth of new orders was dragged lower in particular by a renewed slump in exports of services, which suffered the steepest fall since February amid reports of a drop in travel due to the new virus wave.

Manufacturing growth meanwhile also remained subdued, constrained by widespread component shortages and a fourth consecutive monthly fall in export orders. Although the rate of factory output growth picked up marginally in December to the highest since August, aided in part by some signs of near-record supply chain delays starting to ease, it should be noted that the survey's output index is broadly consistent with stalled production as measured by official data, IHS Markit said.

Service sector prospects for the year ahead meanwhile slipped to the darkest since October 2020 due to the growing virus worries, though signs of improving supply helped lift business expectations in the manufacturing sector to the highest since May, it added.

ALCHEMPro News Desk (DS)

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