Monthly economic brief: February 2022

Business Activity

Business surveys indicate that business activity strengthened slightly in January and into February as Omicron restrictions were eased.

Business trading status and activity

• The Omicron restrictions introduced in December were eased over January enabling the resumption of large outdoor events, the removal of physical distancing restrictions in hospitality and leisure settings and the removal of working from home guidance.
• The changes in guidance and restrictions over this period were reflected in the trading status of businesses. At an aggregate level, the change in the proportion of businesses reporting as currently trading was marginal, falling to 98% during December and January before rebounding to 99% going into February.^[2] However, it's important to note that of those business trading, 92% reported as fully trading and 7% partially trading.
• As with previous waves of the virus, the fall in the proportion of businesses trading was most evident in consumer facing services. 91% of businesses in the accommodation and food services sector were trading during December before rebounding back to 99% at the end of January. Furthermore, businesses in the consumer facing sectors continued to have the highest proportion of firms only partially trading - 29% in the accommodation and food services and 27% in the arts, entertainment and recreation services sector.

• Several factors have impacted business activity and trading status at the start of the new year, including the holiday season, as well as the increased restrictions and their impact on demand, capacity and staffing availability.
• Overall, the Purchasing Managers Index (PMI) business survey signalled a slight pick-up in growth in January having slowed in December (53.7, up from 52.7).^[3]
• The pick-up in activity was supported by further growth in new business, however this was confined to the services sector while new orders fell for a second month in the manufacturing sector. Overall, the pace of growth in new orders was largely unchanged from the slowdown in December reflecting that demand continued to be impacted by current headwinds from Omicron and ongoing supply side issues.

• More recently, flash UK PMI data indicated that private sector growth strengthened further in February, with the composite output indicator rising to an eight month high (60.2, up from 54.2 in January). This was particularly led by increased spend on transport, leisure and entertainment following the easing of restrictions, however manufacturing output was also reported to have improved with respondents suggesting that raw material availability had improved, enabling firms to improve stocks and reduce backlogs of work.^[4]