# UK growth slows sharply in July as COVID ‘pingdemic’ hits
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-23
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK Economy Slows as COVID Wave Hits: PMI Data
Meta Description: UK economy's growth slows in July as staff shortages and virus surge impact supply chains, customer demand, and economic outlook, causing PMI to drop to
URL: https://financedigest.com/uk-growth-slows-sharply-in-july-as-covid-pingdemic-hitshtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-07-23t083506z1lynxmpeh6m0dhrtroptp4britain-economy-gdp-1736838143045-compressed.jpg)

By David Milliken

LONDON (Reuters) -Britain’s rapid economic bounce-back from the coronavirus pandemic slowed sharply in July as a new wave of cases forced hundreds of thousands of workers to self-isolate under government rules to limit the spread of the disease.

Supermarkets and hauliers say staff shortages are making it hard to restock shelves and deliver goods, and Friday’s monthly purchasing managers’ index (PMI) data gave the first clear evidence of the scale of the impact.

The IHS Markit/CIPS flash composite PMI dropped to 57.7 in July from 62.2 in June. A reading above 50 indicates [growth in the economy but the reading was the lowest since March](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") and a sharper fall than most economists had forecast in a Reuters poll.

July saw the UK [economy’s recent growth](https://www.financedigest.com/visa-revenue-growth-slows-more-as-tough-economy-sobers-spending.html "Visa revenue growth slows more as tough economy sobers spending") spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook,” Chris Williamson, chief business economist at IHS Markit, said.

The economy was still on course to expand in the [third quarter](https://www.financedigest.com/robinhood-sees-retail-traders-taking-a-breather-in-third-quarter.html "Robinhood sees retail traders taking a breather in third quarter"), but at a slower pace than before, he added.

The British PMI contrasted with the one for the euro zone, which struck its highest since July 2000, and [sterling extended losses after the data](https://www.financedigest.com/sterling-edges-lower-ahead-of-key-data.html "Sterling edges lower ahead of key data").

Britain’s [economy has rebounded after its nearly 10% slump in 2020 when the country suffered](https://www.financedigest.com/uk-factories-suffer-worst-month-since-may-2020-as-economy-stumbles-pmi.html "UK factories suffer worst month since May 2020 as economy stumbles – PMI") one of the world’s heaviest coronavirus death tolls and locked down for longer than many other European nations.

But [reopening has created bottlenecks and inflation](https://www.financedigest.com/can-beijing-decouple-its-reopening-from-growing-inflation-in-2023.html "Can Beijing Decouple Its Reopening From Growing Inflation in 2023?") pressures. Two Bank of England policymakers have suggested an early [end to the BoE’s](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") bond-buying stimulus.

Friday’s PMI data showed a record rise in [businesses’ costs and a near-record increase](https://www.financedigest.com/frances-ynsect-to-refocus-bug-business-after-capital-increase.html "France’s Ynsect to refocus bug business after capital increase") in the prices they charged.

However, the weaker-than-expected activity figures are likely to make other policymakers wary of [scaling back](https://www.financedigest.com/russia-sharply-scales-back-far-east-war-games-with-china.html "Russia sharply scales back Far East war games with China") support next month. The BoE is due to announce its next [policy decision](https://www.financedigest.com/asian-shares-rise-dollar-dips-ahead-of-fed-policy-decision.html "Asian shares rise, dollar dips ahead of Fed policy decision") on Aug. 5.

Given today’s numbers, the uncertainty around the Delta variant and the impact of the end of the Job Retention Scheme from September, we expect the Bank to stick to its current course,” Willem Sels, chief investment officer at HSBC’s [wealth management](https://www.financedigest.com/analysis-credit-suisse-collapse-threatens-switzerlands-wealth-management-crown.html "Analysis-Credit Suisse collapse threatens Switzerland’s wealth management crown") division, said.

CONSUMERS [SEE CLOUDS AHEAD](https://www.financedigest.com/italys-mps-sees-safe-habour-ahead-after-strong-quarter.html "Italy’s MPS sees ‘safe habour’ ahead after strong quarter")

The slower growth in business activity seen in the PMI survey – conducted July 12-21 – contrasted with a return to [pre-pandemic consumer confidence levels](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels") in a survey by market researchers GfK published earlier on Friday.

However, households did express greater concern about the economic outlook than a month earlier due to worries about COVID-19 variants, [rising inflation](https://www.financedigest.com/average-annual-uk-food-bill-set-to-rise-454-pounds-as-inflation-soars.html "Average annual UK food bill set to rise 454 pounds as inflation soars") and reduced furlough support.

Other figures showed retail sales volumes rose 0.5% in June to stand 9.5% above pre-pandemic levels, bolstered by a [jump in food and drink during the Euro](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes") 2020 soccer tournament.

Monday marked the end of most [COVID restrictions](https://www.financedigest.com/chinas-covid-resurgence-spurs-new-curbs-foxconn-imposes-restrictions.html "China’s COVID resurgence spurs new curbs, Foxconn imposes restrictions") on businesses in England, with nightclubs allowed to reopen, mask-wearing requirements largely scrapped and capacity restrictions lifted for pubs, restaurants and shops.

But the reopening has been questioned by critics of the government, coming just as [COVID cases are rising](https://www.financedigest.com/oil-prices-rise-as-china-eases-covid-curbs-u-s-storm-fuels-supply-worries.html "Oil prices rise as China eases COVID curbs, U.S. storm fuels supply worries") again.

The latest wave of infections led to more than 600,000 people in England and Wales being told to self-isolate last [week because they were close contacts of people who tested](https://www.financedigest.com/china-arrivals-in-uk-next-week-will-not-face-compulsory-covid-tests-independent.html "China arrivals in UK next week will not face compulsory COVID tests -Independent") positive and were “pinged” by a government app.

[Businesses want the government to bring forward the scheduled Aug](https://www.financedigest.com/euro-zone-business-activity-contracted-again-in-aug-outlook-bleak-2.html "Euro zone business activity contracted again in Aug, outlook bleak"). 16 lifting of that requirement for workers who are fully [vaccinated or test negative for COVID](https://www.financedigest.com/fda-advisers-back-the-same-covid-vaccine-for-initial-shots-boosters.html "FDA advisers back the same COVID vaccine for initial shots, boosters"). The government said it would exempt up to 10,000 workers in [food supply](https://www.financedigest.com/russias-putin-indias-modi-to-discuss-trade-food-supplies-on-friday.html "Russia’s Putin, India’s Modi to discuss trade, food supplies on Friday") chains.

The fall in the PMI was greatest in the [services sector](https://www.financedigest.com/decline-in-german-services-sector-eases-raising-hopes-for-milder-recession-pmi.html "Decline in German services sector eases, raising hopes for milder recession -PMI"), especially among transport and hospitality firms.

Orders [growth was the weakest since February and business](https://www.financedigest.com/brand-metrics-continues-on-steep-growth-trajectory-with-appointment-of-vp-business-development-in-the-us.html "Brand Metrics continues on steep growth trajectory with appointment of VP Business Development in the US") optimism fell to its lowest since October 2020, before news of effective COVID vaccines. Brexit-related [trade frictions also hurt business](https://www.financedigest.com/over-80-of-businesses-forsee-difficulties-in-european-trading-when-the-uk-leaves-the-eu.html "Over 80% Of Businesses Forsee Difficulties In European Trading When The UK Leaves The EU") morale and new orders.

(Reporting by David MillikenEditing by William Schomberg, Toby Chopra and Susan Fenton)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---