With the outbreak of new crown pneumonia, UK economic growth slowed sharply in July Reuters

David Milliken

LONDON (Reuters)-The UK’s rapid recovery from the coronavirus pandemic slowed sharply in July as a new wave of cases forced hundreds of thousands of workers to self-isolate in accordance with government regulations to limit the spread of the disease.

Supermarkets and transporters said that staff shortages have made replenishment and delivery difficult, and Friday’s monthly purchasing managers’ index (PMI) data clearly demonstrated the scale of the impact for the first time.

The initial value of the IHS Markit/CIPS composite PMI fell from 62.2 in June to 57.7 in July, the lowest level since March, and the decline was greater than most economists predicted in the Reuters survey.

“In July, the recent growth of the UK economy was dampened by the rising wave of virus infections, which suppressed customer demand, disrupted the supply chain and caused widespread staff shortages, and also clouded the outlook,” Chief Commercial Economist Chris Williamson said. IHS Markit said.

The data was collected between July 12 and July 21.

The UK economy has rebounded sharply from the nearly 10% decline in 2020, when the country’s lockdown lasted longer than many other European countries to deal with one of the world’s worst coronavirus deaths.

According to a survey released earlier on Friday, the decline in business activity seen in the PMI survey is in stark contrast to the rise in consumer confidence to the highest level since before the pandemic.

However, due to fears of COVID-19 variants, rising inflation and reduced vacation support, households are more worried about the economic outlook than they were a month ago.

Other data show that retail sales in the UK increased by 0.5% in June, 9.5% higher than the pre-pandemic level, thanks to the surge in food and beverage expenditures brought about by football fans enjoying the 2020 European Cup.

COVID restrictions relaxed

Monday marked the end of most COVID restrictions on businesses in England, nightclubs were allowed to reopen, the requirement to wear masks was basically removed, and capacity restrictions for bars, restaurants and shops were also lifted.

But critics of the government questioned the reopening. This coincided with the surge in COVID cases driven by the Delta variant and the chain reaction, as close contacts of people who tested positive were “pinged” by the health service app, requiring 10 days of self-isolation.

Last week, more than 600,000 people in England and Wales were told to self-isolate.

Companies have called on the government to cancel the isolation requirements for workers who have been vaccinated or tested negative for COVID, which was originally scheduled to be cancelled on August 16.

The UK government plans to provide limited exemptions for up to 10,000 workers in the food supply chain.

The largest decline in PMI was in the service industry, especially the transportation and hotel industries.

Order growth was the weakest since February, and business optimism fell to its lowest point since October 2020, after news that an effective COVID vaccine has been developed.

Trade frictions related to Brexit and rising costs of employees and raw materials also hurt corporate morale and new orders this month.

Input costs are growing at the fastest rate in more than 20 years, and companies are raising prices only slightly below the historical high in June.

The Bank of England is closely watching whether price increases are likely to be longer than initially predicted as the global economy reopens.