Yahoo Finance Omicron holds back UK recovery as hospitality and travel sectors suffer
UK business activity slowed in January to an 11-month low as the hospitality, leisure and travel sectors continued to struggle with Omicron restrictions, the latest figures reveal.
The IHS Markit/CIPS Composite Purchasing Managers Index (PMI), seen as gauge of overall economic health, slipped in January to 53.4 from 53.6 the month before as cost pressures remained high, putting the Bank on England on track to raise interest rates.
“With inflationary pressures remaining elevated at near-record levels, this all adds to the likelihood of the Bank of England hiking interest rates again at its upcoming meeting,” Chris Williamson, chief business economist at IHS Markit, said
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The government’s plan B measures, launched at the beginning of December, hit consumer-facing companies and manufacturers the hardest as orders grew at the weakest pace for a year.
PMI for the services sector fell in January to 53.3 from 53.6 in December — its lowest level since February last year.
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.
In contrast, business and financial services companies saw a quicker rate of expansion.
“A resilient rate of economic growth in the UK during January masks wide variations across different sectors,” Williamson said.
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“Consumer facing businesses have been hit hard by Omicron and manufactures have reported a further worrying weakening of order book growth, but other business sectors have remained encouragingly robust.”
Business expectations for the year ahead were upbeat in January and the degree of optimism rebounded to its strongest since August 2021, reflecting higher levels of positive sentiment in the service economy.
"The private sector may be experiencing a sense of two steps forward and one step back with price and supply challenges, but with the strongest level of optimism since August 2021 we may be looking forward to a more favourable trading environment in the months ahead," Duncan Brock, group director at CIPS, said.
