David Milliken

LONDON, (Reuters) – The UK’s services sector grew at its slowest rate since December when the country was under lockdown. This is because the Omicron virus of coronavirus ravaged hospitality and travel.

Final data from IHS Markit/CIPS showed that the Purchasing Managers Index (PMI), fell to 53.6 in December, down slightly from 58.5 in November. This was a slight improvement on the preliminary flash reading of 53.2.

Composite PMI (which includes Tuesday’s upbeat manufacturing PMI) showed an identical move.

Tim Moore, an economist at IHS Markit said that mass cancellations of bookings triggered by the Omicron variant resulted in a decline in travel and leisure spending.

When the economy was under lockdown and restaurants were not open to the public, the last time that the index fell was February 2020. However, December’s data showed no sign of contraction or growth.

The Prime Minister Boris Johnson, unlike the last year’s wave of COVID-19-related cases, has rejected the new English legal restrictions. But curbs on hospitality still apply elsewhere in England.

Britons are also following health advice that limits social gatherings. A PMI survey found a decline in growth for business services and a larger drop in demand of face-to-face services.

IHS Markit reported that services businesses are more optimistic for 2022 overall, but with only 10% expecting a decrease and 55% anticipating an increase in output.

Many economists anticipate a significant squeeze in consumer demand this year due to sharply increasing inflation. The Bank of England predicts that the Bank of England will forecast a peak of around 6.6% for April. This is just 30 years after the government raised taxes on the workers.

In an effort to alleviate longer-term price pressures, the BoE started raising interest rates last month from 0.1% (record low).

Moore explained that businesses were pressured to improve their pay rates in an increasingly competitive market.

Although they were up from their peak a few month earlier, the December 2021 PMI ‘prices charged & input costs’ components of services PMI were significantly higher than at the beginning of 2021.