LONDON – Britain’s post-lockdown economic bounce-back slowed sharply in August as companies struggled with unprecedented shortages of staff and materials, but strong inflation pressures cooled a bit, a survey showed on Monday.
The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sinking to 55.3 from 59.2 in July, its lowest since February and a sharper fall than a median forecast of 58.4 in a Reuters poll of economists.
The pace of growth was slightly above the pre-pandemic average but “there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter”, said Chris Williamson, chief business economist at IHS Markit.
“Despite COVID-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages.”
Companies have complained that self-isolation requirements for contacts of people with COVID-19 have made it hard for them to find enough staff but those requirements were dropped from Aug. 13 for people who have had two vaccinations.
On a brighter note, a measure of employment hit a record high as furloughed workers return to their jobs and businesses were more optimistic about future output.
A gauge of input prices fell after hitting a more than 20-year high in July and the prices charged by factories moved further away from June’s record high.
The Bank of England is watching to see whether a jump in inflation turns into more stubborn price growth. Reuters reported.
The BoE said earlier this month it expected “modest monetary tightening” would be needed over its three-year forecast period.
The fall in the PMI was mostly driven by services firms who make up the bulk of Britain’s economy. Manufacturing dipped only slightly although automotive and electrical goods production fell into decline due mainly due to supply constraints.
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