DAVY VIEW

The flash composite PMI readings for the euro area (52.4) and UK (53.4) both fell to 11-month lows in January, pointing to the Omicron variant holding back activity – particularly in consumer facing services. However, expectations for 2022 are more optimistic. One chink of light was an alleviation of raw materials shortages in manufacturing, allowing output growth to accelerate. However, the PMIs also signalled record cost pressures in the services sector due to rising energy bills and wage costs.