Press release

21 Feb 2022 London, GB

Services activity gains as COVID-19 disruption declines – EY ITEM Club comments

A strong rebound in February’s flash services PMI to 60.8, an eight-month high, points to the economy quickly making up Omicron-related losses experienced around the turn of 2021 and 2022.

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Related topics Growth COVID-19
  • A strong rebound in February’s flash services PMI to 60.8, an eight-month high, points to the economy quickly making up Omicron-related losses experienced around the turn of 2021 and 2022.
  • The manufacturing PMI flatlined, but this partly reflected easing supply frictions offsetting stronger activity. Meanwhile, cost pressures remained high across the economy, adding to the odds that the MPC will raise interest rates again next month.

Martin Beck, chief economic advisor to the EY ITEM Club, says:

“February’s flash PMIs boosted hopes that the economy is exiting quickly the lull in activity caused by the spread of the Omicron variant at the end of last year. A fall in consumer hesitancy as infection numbers declined and the relaxation of isolation rules likely contributed to the flash services PMI rebounding to an eight-month high of 60.8 from 54.1 in January.

“The flash manufacturing PMI was unchanged at 57.3 from a month earlier. But no-change disguised the strongest growth in output since July 2021, with the boost to the index from this partly offset by an easing of supply frictions – the IHS Markit/CIPS survey’s measure of delivery times lengthened to the smallest extent since November 2020. The resilience of manufacturing output combined with the rise in the services PMI caused February’s flash composite PMI to rise to 60.2 (also an eight-month high) from 54.2 a month earlier.

“However, the picture for inflation was less pleasing. Input prices rose at the fastest rate since last November and the second highest pace since the index began in 1998. This adds to the odds that the MPC will raise rates again in March’s meeting. And the drag on activity from elevated inflation, combined with April’s forthcoming rises in energy bills and taxes, point to a weaker period for the PMIs and the economy ahead.”