Supply chain disruption and the Omicron variable to slow UK recovery; German factory orders drop – Business Live | a job

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Good morning, and welcome to our renewed coverage of the global economy, financial markets, the eurozone, and business.

The UK economic outlook looks less bright this morning, as shortages, rising costs and the prospect of more Covid restrictions all threaten growth.

KPMG has warned that GDP growth could fall by more than half next year if more anti-Omicron restrictions are imposed, depending on the severity of the new variable.

In the central scenario, the UK government will restore social distancing restrictions in retail and hospitality settings, encouraging people to work from home if they can in January and February 2022.

If that happens, the economy will contract by about 2% in the first quarter of 2022, slowing overall growth next year to 2.6%, down from 6.7% this year.

In KPMG’s downside scenario, the threat of a significant spike in severe Covid-19 cases leads to another shutdown in early 2022. This would result in a sharp drop in GDP, around 4.2%, in January-March 2022 , bringing down growth next year to a mere 1.8%.

Photo: KPMG

While growth momentum is expected to slow until an enhanced tool to stem the rise in cases is rolled out, the full impact of the new variable will depend on the rise in the number of severe Covid cases and any social distancing restrictions introduced, the report explains. .

Yael Selvin, chief economist at KPMG UK says:

“The Omicron variant has raised the level of uncertainty about the course of recovery from the pandemic.

While the impact is not expected to be as severe as it was at the beginning of the pandemic, or even the beginning of this year, increased uncertainty and the possibility of reintroducing social distancing measures could lead to lower production this month and during the first quarter of 2022.”

KPMG’s new growth forecast Photo: KPMG

The report adds that some sectors may still be significantly affected by the epidemic, compared to the general economy:

Additional travel restrictions and new pandemic hot spots are expected to see a slower and more prolonged recovery in the sector. Rail travel will also be affected due to the slower return of passengers to their workplaces.

Passenger numbers were still down 22% in late November compared to pre-pandemic levels and are likely to drop as people are encouraged to work from home.

KPMG also warns that supply chains will come under further strain, if the pandemic again increases demand for goods from locked-in consumers. The report adds that the lack of employment has become a major impediment to growth, as well as rising wages.

These concerns may prevent the Bank of England from raising interest rates at its next monetary policy meeting later this month. Deputy Governor Sir Ben Broadbent gave his view on the economic outlook this morning.

We also find out how builders in the UK and the Eurozone performed last month.

Agenda 7 am GMT: German Factory Orders at 8:30 am GMT: Eurozone construction PMI for November 8.30 am GMT: UK construction PMI for November 11:30 am: BoE Deputy Governor throws Sir Ben Broadbent Speech at the University of Leeds on “Prospects for Growth, Inflation and Monetary Policy”.

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