U.K.’s Covid Surge Cuts Growth to Slowest Since Lockdown
Britain’s purchasing managers recorded the slowest growth since the height of a national lockdown 10 months ago as a surge in coronavirus cases dimmed the outlook.
IHS Markit said its index tracking output across the economy fell to 53.2 this month from 57.6 in November, reflecting weaker-than-expected growth in service industries including hotels, restaurants and travel-related businesses. Business-to-business services stalled.
The findings add to evidence of headwinds facing the U.K. economic recovery as the Bank of England weighs whether to pivot away from stimulating growth and toward fighting inflation. Markit said the BOE had access to the figures before their release and in time for the decision due Thursday.
Markit said upward pressures on prices eased in the last month as supply chain issues dissipated in manufacturing and that the outlook for next year was looking more bleak.
“The pace of economic growth looks likely to continue to weaken into 2022,” Chris Williamson, chief business economist at Markit, said in a statement on Thursday. “The bigger uncertainty will be on how rising inflation rates both at home and abroad might cause further supply shortages.”
The central bank is expected to leave interest rates on hold when policy makers announce their decision at 12 p.m. in London on Thursday, though most investors anticipate a tightening early next year. Inflation leaped to 5.1% last month, more than double the BOE’s target.
High-frequency data published Thursday revealed evidence of increased caution since news of the omicron variant emerged in late November. They showed consumers curtailing spending on credit and debit cards into the second week of December, making fewer visits to stores, eating out less and reducing travel. Employers also posted fewer job adverts.
U.K. High-Frequency Indicators Fall as Omicron Curbs Bite
Policy makers are balancing a surge in Covid-19 cases against rising inflation, and the Markit data suggests that the virus will have a widespread chilling effect on the economy. The headline index fell to its lowest level since February, when nationwide restrictions closed many businesses.
Optimism about the outlook fell to its lowest in four months. Service industries grew at their slowest pace in 10 months, registering 53.2, much weaker than economists’ forecasts for a reading of 57.
“Survey respondents widely cited a negative impact on consumer demand from tighter Covid-19 stringency measures and renewed travel restrictions,” Markit said in a statement.
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