(Sharecast News) – Business activity tumbled in January as the third lockdown took its toll, putting the UK on course for a double-dip recession, according to a survey released on Friday.
The IHS Markit/CIPS flash UK composite purchasing managers’ index – which measures activity in both the services and manufacturing sectors – fell to 40.6 from 50.4 in December, coming in below economists’ expectations for a reading of 45.5 and below the 50.0 mark that separates contraction from expansion.
Still, it remained well above the all-time low of 13.8 reached in April.
The flash PMI for the services sector printed at 38.8 in January from 49.4 the month before, marking its lowest level since May and missing expectations for a reading of 45.0 as the industry was hit hard by Covid-19 restrictions.
Meanwhile, the manufacturing PMI declined to 52.9 from 57.5, versus expectations of 53.6.
Chris Williamson, chief business economist at IHS Markit, said: “A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards.
“Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of Covid-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.”
Williamson also pointed to the fact that companies reduced headcounts at an increased rate again in January, albeit less so than between March and November.
“The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures,” he said.
