Omicron drives down UK and Eurozone growth to lowest level in 11 months; banknote maker De La Rue warns of profits – business live | Business
The Omicron variant has driven UK business growth to its lowest level since the shutdowns nearly a year ago.
UK retail activity fell to an 11-month low in January, led by a slowdown in the services sector, according to a closely watched survey of UK purchasing managers from IHS Markit.
The customer-facing parts of the economy were, understandably, hardest hit by Omicron, with the UK experiencing a “two-speed recovery in January”.
The services sector slowed for the third month in a row, with hospitality, leisure and travel all struggling due to restrictions introduced last month and now being eased.
Businesses across the economy reported rising backlogs due to staff absences as record numbers of Covid-19 infections led to more people being sick or isolated.
But there’s also good news: Manufacturing output hit a five-month high, thanks to a ‘sustained recovery in material availability’, which could show that the supply chain crisis is finally easing. .
Business confidence in the outlook has also improved, leading to solid and sustained employment growth.
The IHS Markit/CIPS Composite PMI, which tracks activity in the economy, fell in January to 53.4 from 53.6.
This is the lowest in 11 months, and weaker than expected (economists expect a rise to 55, which would have shown a recovery). But it is above the Eurozone composite PMI of 52.4 (see previous article), suggesting the UK has started 2022 a bit stronger.
IHS Markit PMI™
(@IHSMarkitPMI)🇬🇧 January flash data for the UK indicated a slower expansion with the #PMI at 53.4 (dec: 53.6). Greater availability of materials led to faster growth in manufacturing, while rising Omicron business continued to impact services. Read more: https://t.co/su0dpz6cK6 pic.twitter.com/4I8VYKbY0q
Chris Williamsonot, Chief Business Economist at IHS Markit, indicates that there have been large variations between different sectors this month.
Consumer-facing businesses were hit hard by Omicron and manufacturers reported a worrying further weakening in order book growth, but other business sectors remained encouragingly strong.
Going forward, while the Omicron wave meant the hospitality sector sank into a third sharp downturn, those restrictions are now being eased, meaning this downturn is expected to be brief. Many business services and financial services companies have meanwhile been much less affected by Omicron and have seen their growth accelerate at the start of the year.
With inflationary pressures remaining elevated at near-record levels, all this adds to the likelihood of the Bank of England raising interest rates again at its next meeting, he adds:
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