UK growth slips to 11-month low as Covid weighs down economy
UK growth slips to 11-month low as Covid cases weigh down the economy and inflation surges
- Closely-watched PMI index has slipped to an 11-month low as UK economy stalls
- The reading for January is 53.4 with anything above 50 representing growth
- Warnings that Covid is weighing down business and prices are set to rise more
UK growth has slipped to an 11-month low as Covid cases weigh down the economy and inflation surges.
The closely-watched IHS Markit/CIPS index came in at 53.4 this month, the worst since restrictions started being eased last year.
Although anything above 50 represents growth, grim performance in the hospitality, leisure and travel sectors have been offset by a better showing for manufacturing and financial services.
Experts have also warned that businesses are under huge pressure from energy price rises and staff costs, and will be forced to pass the burden on to consumers.
The flash PMI reading reflected a further slowdown following the 53.6 for December.
The closely-watched IHS Markit/CIPS index came in at 53.4 this month, the worst since restrictions started being eased last spring
Chris Williamson, chief business economist at IHS Markit, said: ‘A resilient rate of economic growth in the UK during January masks wide variations across different sectors.
‘Consumer-facing businesses have been hit hard by Omicron and manufacturers have reported a further worrying weakening of order book growth, but other business sectors have remained encouragingly robust.’
Duncan Brock, group director at CIPS (Chartered Institute of Procurement & Supply), said: ‘In the gloomiest month of the year what is also disappointing for the UK economy is price inflation returning with a vengeance with the second highest jump in business expenses since 1998.
‘Staff wages and energy price hikes made up the bulk of the extra burden and businesses will inevitably pass on these costs to consumers.’
The consumer-facing services industry saw the growth in activity slowdown again, moving to a reading of 53.3 from 53.6 in December.
It was the third month in a row the sector weakened and surveyed firms blamed the loss of momentum on continued Covid-19 disruption and subdued demand from cautious customers.
Manufacturers also reported a slowdown in activity as new order volumes sank to their lowest since January 2021.
Some manufacturers noted lower sales to customers hit by Omicron restrictions, while others suggested that forward-purchasing to beat new price lists for 2022 had weighed on demand in January.
The survey also highlighted that cost inflation remained ‘stubbornly high’ and accelerated again to close in on last November’s all-time high.
It was revealed last week that the headline CPI rate of inflation has hit 5.4 per cent – with fears it will go even higher
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