- December’s construction PMI fell to a three-month low of 54.3. But the index remained firmly in growth territory, suggesting that activity in the sector stood up well to Omicron disruption. The construction survey also pointed to an easing in supply bottlenecks and inflationary pressure, mirroring the findings of December’s services and manufacturing PMIs.
- But construction accounts for only a small part of the economy. The impact on the economy’s dominant services sector from the Omicron variant and its associated restrictions on activity, a rise in the number of people isolating and increased consumer hesitancy, all point to GDP falling in December, setting up a weak starting point for growth in 2022.
Martin Beck, chief economic advisor to the EY ITEM Club, says:
“The construction PMI fell to a three-month low of 54.3 in December, down from 55.5 in November. But this was still comfortably above the 50 ‘no-change’ mark separating the IHS Markit/CIPS survey’s measure of expansion from contraction. New orders rose at the strongest pace since August, and there was good news on the supply side. The number of construction firms reporting supplier delays fell, contributing to input price inflation slowing to a nine-month low.
“December’s construction PMI joined its manufacturing counterpart in suggesting that the two sectors have stood up well to disruption stemming from the rapid spread of the Omicron variant. But a significant fall in December’s services PMI and a deterioration in high-frequency measures of consumer activity point to the economy’s dominant sector faring less well in the face of the latest COVID-19 variant, associated restrictions on activity, a rise in the number of people isolating and increased consumer hesitancy.
“The EY ITEM Club believes that GDP fell in December and will struggle to grow much in early 2022, meaning a weak starting point for expansion this year. But the speed at which Omicron is spreading, the rising share of people who have received a booster jab and the reluctance of the Government to extend social distancing restrictions further offer hope that the negative impact on the economy from the latest COVID-19 variant will prove fairly short-lived.”