BERLIN (Reuters), – German private sector growth slowed in December after restrictions were placed on the fourth wave of coronavirus infection. This was revealed in a Thursday survey.

IHS Markit’s Flash Composite Purchasing Managers’ Index fell to 50.0 in December, an 18-month high, after 52.2 in November. It was lower than the 50.0 predicted by Reuters analysts, who for December had expected a fall to 51.1.

An activity level equal to 50 is considered unchanged. Any value higher than that indicates growth, and any lower indicate contraction.

Phil Smith, Markit economist said that the German economy’s recovery had been slowed by the return of the pandemic in December. He also stated that renewed uncertainty and restrictions have slowed activity in the service sector.

Flash PMI for Services Activity fell to 48.4, down from 52.7 in the month before. This suggests a decline in retail sales during the holiday season.

After production bottlenecks in microchips and intermediate goods impacted factory output, particularly among Germany’s largest carmakers, some improvements were seen within the industrial sector.

Manufacturing’s flash PMI rose to 57.9 in December, from 57.4 during November.

Smith explained that Smith had not seen any disruptions in supply chain due to the Omicron variation’s emergence.

However, he warned that Omicron may have not reached its full potential and things could rapidly change in the event of more infections. This is especially true for countries using a zero COVID approach.

Data from PMI showed that inflation rates in input and output costs were slightly lower than the highs of November, when Germany’s EU-harmonized consumer prices index reached 6%.

Markit noted that at the same time business expectancies rose due to optimism about the possibility of supply-chain problems and pandemic related curbs on activity fading over the course of the year.

According to the Ifo economic institute, Tuesday’s forecast was that the German economy would shrink 0.5% quarter on quarter in the last three months and stagnate for the first three months next year.

Germany faces winter months with “stagflation,” or zero growth coupled with high inflation, due to rising overall prices.