Rising infection rates and inflation are slowing economic growth

The UK economy has suffered a marked slowdown in growth so far this month, due to a shortage of personnel and raw materials, according to a new survey.

The closely watched IHS Markit / CIPS composite production index, which measures different parts of the economy, hit 57.7, down from 62.2 in June at levels not seen since before lockdown restrictions began to soften. Anything over 50 is considered a sign of growth.

Concerns about slowing down also led to the lowest level of optimism about the business outlook in nine months, with companies struggling to manage much of the workforce due to the obligation to s ‘isolate.

Some also reported that workers took unused vacation accumulated from recent shutdowns.

About 32% of those polled said they saw an increase in business activity in July, compared with 16% who reported a decline, with looser restrictions, an increase in consumer spending due to more “stays” and a solid order book in the manufacturing sector.

The pace of the increase in new job levels has been the slowest in the current five-month expansion period, with some companies citing a drop in business and consumer confidence due to the pandemic situation, while d Others continued to report Brexit-related difficulties with export sales.

Manufacturers in particular have said rising raw material costs, Brexit border controls and increasing delays in global shipments were playing a role in the slowdown.

The UK service business activity index hit 57.8 – a four-month low and down from 62.4 last month; The Flash UK manufacturing output index in the first half of July also hit a four-month low at 57.1 – down from 61.1 in June; and the UK Manufacturing Flash Purchasing Managers Index (PMI) hit a four-month low at 60.4, down from 63.9 last month.

While current staff absences continue to pose challenges, there have also been recruitment challenges, with job growth falling to its lowest rate since March.

A large number of staff departures and a lack of candidates for positions were highlighted by the survey.

Inflationary pressures are also increasing, with wage inflation, higher transportation bills and supplier price hikes all impacting the economy.

However, manufacturers have said that while prices continue to rise, they are not increasing at the same rate as the historic highs in June.

UK private sector companies remain broadly optimistic about their outlook for business growth over the next 12 months.

However, the level of confidence fell to its lowest since October 2020 as the second round of lockdowns in the UK began.

Chris Williamson, chief economist at IHS Markit, said: “July saw the recent growth spurt in the UK economy stifled by the growing wave of viral infections, which has reduced customer demand, disrupted retail chains. supply and caused widespread staff shortages, and also cast a darkening shadow over the outlook.

“Businesses in transportation, hotels and other consumer services were hit the hardest, although manufacturing also saw its growth weaken significantly during the month. “

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