Global business activity slows but optimism remains for the year ahead

New waves of Covid-19 infections, supply chain problems and persistent inflation continue to hold back business recovery, according to a closely watched global survey. In the eurozone, initial estimates for January from IHS Markit’s purchasing managers’ index showed activity growing at its slowest rate in 11 months. The overall PMI reading was 52.4, down from 53.3 in December. A score above 50 indicates a majority of businesses are reporting higher activity than a month ago. Inflation remains a key concern, with businesses saying the price of goods and services had risen at the fastest rate since the survey started in 2002. The sectoral result for services fell to a nine-month low of 51.2, although separate Financial Times analysis of alternative eurozone indicators, such as cinema ticket sales and hotel bookings, suggested pandemic damage was not as severe as in previous waves. Manufacturing, especially in Germany, fared better, as an easing of supply chain bottlenecks helped lift the sector’s score to a five-month high of 59.


Activity in the UK similarly fell to an 11-month low of 53.4 in January, from 53.6 the previous month. Inflationary concerns were again to the fore, with higher energy costs and wages driving input costs up at the second fastest rate since the survey began in 1998. As in the eurozone, manufacturing outpaced services, which were hit harder by coronavirus restrictions. However, there was more optimism on future prospects, with expectations for the year ahead at their most upbeat since the summer. There was also some positive news from manufacturing in Japan, where activity grew at its fastest rate in four years. This was despite the fact that the overall PMI figure fell to 48.8, from 52.5 last month, as services were hit badly by a new wave of infections and restrictions.


The US experienced the most dramatic fall in overall PMI, with the aggregate score falling from 57 to an 18-month low of 50.8, as new infections exacerbated supply problems and labour shortages, slowing output in manufacturing as well as services. Chris Williamson, chief business economist at IHS Markit, said soaring virus cases had brought the US economy “to a near standstill” at the start of the year. Demand, however, was less affected, he noted, suggesting growth will pick up again once restrictions are relaxed.






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