Private sector output suffers biggest drop since May | London Business News

Marco Green
January 22, 2021

The headline index slipped back under the 50.0 threshold that separates contraction from expansion after stabilising for the first time in 20 months in the previous month.

The flash eurozone purchasing managers index fell in January to a two-month low of 47.5 - almost in line with the 47.6 expected - from 49.1 in December.

It is significantly below the expectations of analysts, who predicted a reading of 46.1 for the month.

Chris Williamson, chief business economist at IHS Markit, said: "A steep slump in business activity in January puts the lockdown United Kingdom economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards".

The manufacturing sector performed better than services in January and factories' output rose marginally. This mirrored other manufacturing surveys, suggesting inflation could pick up and remain elevated beyond the anticipated boost from the drop of weak readings in March and April from the calculation.

Duncan Brock, group director at CIPS, said: "Though worrying, this was not an unexpected downturn from businesses ravaged by restrictions, lockdowns and post-Brexit disruption".

Economic activity in the euro zone shrank markedly in January as stringent lockdowns to contain the coronavirus pandemic hit the bloc's dominant service industry hard.

He also warned that since the PMI excludes activity in the retail and public sectors, the closure of schools and the cancellation of non-Covid-19 work by hospitals "will additionally depress GDP". Manufacturers linked the shortages to both Brexit disruption and a severe lack of worldwide shipping availability.

Manufacturers are also raising prices for their products.

According to preliminary estimates, the Eurozone's PMI tanked to 47.5 in January, down from 49.1 registered in December.

Japan's factory activity slipped into contraction in January and the services sector was more pessimistic, a private-sector survey showed on Friday, as emergency measures taken in response to a resurgence of COVID-19 infections hurt sentiment.

Other reports by Click Lancashire

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