According to survey, growth in UK economic activity falls to 10-month low

Growth in UK economic activity slowed to its lowest level since February as the spread of coronavirus variant Omicron hit consumer demand for travel and hotels, a survey shows. important showed on Thursday.

The UK’s rapidly aggregated output index published by IHS Markit and the Chartered Institute of Procurement and Supply fell from 57.6 in November to 53.2 in December, dragging on a sharp decline in activity. service sector dynamics as new virus restrictions weigh on consumer confidence.

Business confidence in the economic outlook also fell for a fourth straight month, with growth expectations for next year now at its lowest level since October 2020 – weaker than at the close of the first quarter. first, while the vaccination is in progress.

There is some good news from the manufacturing sector, where supply chain bottlenecks have eased somewhat, said Chris Williamson, economist at IHS Markit. However, growth is expected to soften in 2022, he added, with “greater uncertainty” over how rising infection rates could exacerbate labor shortages. and supply, increasing inflationary pressures.

Gabriella Dickens, at consulting firm Pantheon Macroeconomics, said the data was “the clearest indication yet that the Omicron variant has helped with the economic recovery”.

Meanwhile, real-time data shows a rapidly deteriorating outlook for industries most directly affected by the rise in infections and the imposition of new restrictions.

Figures from OpenTable, the online booking site, show the number of diners sitting at UK restaurants in the week to December 14 was virtually unchanged from two years ago – the lowest level since when the hospitality sector reopened in May – while the figure was 15 people / higher than the 2019 average for the weekend of November before news of the Omicron variant.

Some businesses with sudden reservations may not be prepared to respond: a survey by the Office for National Statistics found that 13% of all businesses had no cash reserves in the week to date. December 12, the highest rate reported since June 2020. The share increased by nearly one-fifth in the accommodation and food service sectors.

There are also some signs that consumer spending is starting to ease in the most vulnerable sectors.

Airline spending in the week to December 12 was 39% lower than the comparable week of 2019, compared with a 20% shortfall the previous month, according to Fable Data, a company that tracks banking transactions. . There has also been a similar decline in spending more broadly on international travel and tourism, although there have not been any major changes in spending on food, or on public transport and fuel. , despite the renewal of work from home instruction.

Paul Dales, at consulting firm Capital Economics, said that until late last week he had expected December’s gross domestic product to fall by no more than 0.1% due to Omicrons – but the rapid shift has now caused between 0.5 and 1% seems likely.

He added, if the UK starts to shut down in the new year, GDP could fall by at least 3% – with a more severe, prolonged slump likely if the government doesn’t step up support. fiscal.

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