UK growth is at an 11-month low because of Covid cases, which weigh down the economy while inflation rises.
The closely-watched IHS Markit/CIPS index came in at 53.4 this month, the worst since restrictions started being eased last year.
Anything above 50 is growth. However, a poor performance in hospitality, leisure, and travel has been countered by better results for manufacturing and financial service.
Experts warn that business are also under great pressure due to rising energy prices and high staff costs. They will have to shift the cost onto consumers.
After December’s 53.6, the flash PMI read showed another slowdown.
Closely watched IHS Markit/CIPS index reached 53.4 in this month. This is the worst result since last spring’s lifting of restrictions
Chris Williamson is chief business economist of IHS Markit. He stated that a resilient rate for economic growth in Britain during January hides large variations across sectors.
Omicron has reportedly hit consumers-facing companies hard. Manufacturers have also reported worryingly low order book growth. However, other sectors of the economy have continued to be strong.
Duncan Brock, group director at CIPS (Chartered Institute of Procurement & Supply), said: ‘In the gloomiest month of the year what is also disappointing for the UK economy is price inflation returning with a vengeance with the second highest jump in business expenses since 1998.
“Staff wage increases and increased energy price rises accounted for most of the additional burden, which businesses will undoubtedly pass onto consumers.
Activity in the consumer-facing service industry slowing down again. It moved to 53.3 in December from 53.6 in Dec.
The sector suffered its third monthly slump. Respondents blamed Covid-19 disruptions for their slowdown and the subdued demands of cautious customers.
According to manufacturers, there was also a decline in activity due to lower new order volumes. This is the lowest point since January 2021.
Omicron-related sales were reported by some manufacturers as lower, but others pointed out that Omicron’s restrictions had caused them to sell fewer products to their customers. Others suggested forward-purchasing for new prices in 2022 may have impacted demand.
This survey revealed that cost inflation was still’stubbornly’ high, and it accelerated to meet last November’s all time high.
Last week, it was announced that inflation’s headline CPI rate had reached 5.4 percent. There are fears of an even greater increase.