The small pick-up in the output index of Markit’s survey to 53.6 in December, from 52.7 in November, shows that the manufacturing sector’s recovery has not been slowed by Omicron yet, though the impact of the new variant likely will build in January, as worker absenteeism rises and global supply chains come under renewed stress.
The new orders index edged up to 55.1 in December, from 54.5 in November, thereby remaining above its 30-year average, 52.7. Another month of strong employment growth and an improvement in suppliers’ delivery times enabled growth in manufacturing output to speed up and work backlogs to increase at the slowest rate since February. Supply chain disruptions, however, likely will worsen this month, given that Brexit customs checks have been bolstered and Omicron likely will lead to renewed factory closures in Asia.
Meanwhile, the output price index edged up to a new record-high of 74.3 in December, from 74.0 in November, as manufacturers offloaded the burden of soaring energy prices. As a result, core goods CPI inflation looks set to rise further in the first half of 2022, contributing to the peaking of the headline rate at about 6% in April.