Economy storms back from Covid despite soaring costs
THE economy has staged a strong comeback after suffering a temporary hit from the Omicron strain of Covid, a survey has revealed.
Business activity expanded at its fastest rate for eight months, driven by consumer spending on travel, leisure and entertainment, according to the research by number crunchers IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).
Its index bounced back from 54.2 in January to 60.2 this month. Any reading above 50 shows output is growing.
Companies are the most optimistic about the year ahead since last May, when the economy was emerging from lockdown.
Chris Williamson, chief business economist at IHS Markit, said: “The latest PMI surveys indicate a resurgent economy in February, as business activity leapt as Covid-19 containment measures were relaxed.”
Adam Hoyes, assistant economist at consultants Capital Economics, said the “punchy” data “provide even more evidence that the economy has rebounded swiftly after the hit from Omicron”.
February’s reading is based on preliminary data and a full score will be released early next month.
The snapback was driven by the services sector, where the index for output jumped from 54.1 in January to 60.8. But the growth has come with a sting in its tail for businesses, which are seeing costs soar as they compete for staff and raw materials.
Energy bills are also rocketing, helping to increase the cost of doing business to its second highest level since 1998.
As a result, companies are charging more for their products and services.
Duncan Brock, group director at the CIPS, said: “With February’s rate of cost inflation the second highest on record, wage rises, energy costs and continuing raw materials shortages took a sizeable chunk out of business profits.
“On the other side, manufacturers saw a subdued pipeline of work along with job hires as building capacity remained difficult with the continuing talent shortages, and vacancies were unlikely to be filled.”