Service sector

UK service sector growth slows to 10-month low amid Omicron

UK service sector growth hit a 10-month low in December as the Omicron Covid variant took its toll, according to a survey released on Thursday.

the IHS Markit/CIPS The services purchasing managers’ index fell to 53.6 from 58.5 in November, reaching its lowest level since February. Still, it remained above the 50.0 mark that separates contraction from expansion.

The survey found that travel, leisure and hospitality businesses overwhelmingly cited a drop in business due to tighter pandemic restrictions and canceled events over the holiday season.

Tim Moore, chief economics officer at IHS Markit, said: “December data revealed a serious loss of momentum for the UK economy as many customer-facing businesses experienced a drop in demand due to the escalation in Covid-19 cases. Total new orders in the service sector grew at the slowest pace in 10 months. Mass cancellations of reservations in response to the Omicron variant led to a drop in consumer spending on travel , leisure and entertainment Survey respondents also noted that new pandemic restrictions have slowed the recovery of business services.

“Despite concerns about weaker economic growth heading into the new year, service providers reported strong confidence in the longer-term business outlook. survey forecast an increase in production in 2022 as a whole, while only 10% expect a decline.The level of optimism has remained stable since the fall, suggesting that most companies only expect temporary impact on demand for the Omicron variant.”

Gabriella Dickens, senior British economist at Macroeconomics Hall of Famesaid: “December’s Services PMI aligns with other timely indicators that suggest the emergence of the Omicron variant has weighed on consumer services spending over the past few weeks. Google Trends data shows that the The number of people searching online for phrases such as ‘restaurant’, ‘pub’ or ‘gym’ has been very subdued over the past month.

“Furthermore, fewer people are travelling; journeys using the London Underground were almost half of their pre-Covid level in the seven days to the last data point on December 20. We continue to believe that GDP fell about 0.6% month-over-month in December and another 0.3% in January.That said, we cannot rule out a rise in GDP in January if consumers feel more confident to risk contracting Covid-19 now that Christmas is over and people know that Omicron is less likely to cause serious illness than Delta.”