UK Private Sector Growth Slowest In 11 Months

Business

The UK private sector logged a slower growth in January as the Omicron variant continued to weigh on customer-facing parts of the economy, flash survey results from IHS Markit showed on Monday.

The Chartered Institute of Procurement & Supply flash composite output index fell to 53.4 in January from 53.6 in December.

The index signaled the slowest rate of output expansion since the recovery from lockdown began last spring and remained below the economists’ forecast of 55.0.

However, the indicator has stayed above the 50.0 no-change threshold for the eleventh consecutive month.

Manufacturers outperformed service providers as a sustained turnaround in materials availability led to the fastest rise in production volumes for five months.

The services activity expanded at the slowest pace in eleven months, reflecting ongoing pandemic disruptions and very subdued demand in customer-facing parts of the economy.

The services Purchasing Managers’ Index unexpectedly fell to 53.3 in January from 53.6 in the previous month. The expected reading was 54.8.

With hospitality, leisure and travel all struggling due to Omicron restrictions, this offset resilient growth in business and financial services.

The manufacturing PMI declined to 56.9 in January, while the index was forecast to remain unchanged at 57.9.

Manufacturing output increased to the greatest extent since August 2021, despite survey respondents often reporting a negative impact on production from staff isolating due to COVID-19 and supplier delays.

The composite data highlighted a robust and accelerated expansion of new work received by UK private sector companies. Higher demand together with persistent constraints on capacity led to another increase in unfinished orders.

That said, a further strong rise in employment meant that the rate of backlog accumulation was much slower than on average in the second half of last year.

Input cost inflation remained stubbornly high and accelerated to its second-fastest since the survey began 24 years ago.

Business expectations for the year ahead were upbeat in January and the degree of optimism rebounded to its strongest since August 2021.

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