Omicron’s economic impact continues in January

COVID-19 has had a profound impact on the economy, and many employers are facing challenges with staff retention as well as their financial returns.

The Omicron variant has continued the issues that spawned in 2020, and the private sector in the US has now had a devastating blow.

IHS Markit surveyed purchasing managers at a wide range of companies across numerous sectors and found that financial growth in private businesses has frozen amid the spread of Omicron.

The key findings include an 18-month low in the Flash US Composite Output Index at 50.8 and Flash US Services Business Activity Index at 50.9.

The Flash US Manufacturing PMI (Purchasing Managers’ Index) is at 55.0 which is a 15-month low, while the Flash US Manufacturing Output Index is at a 19-month low (50.3).

Impact of the economic decline

The data gathered by IHS Markit gives insight into how the US is managing the pandemic and its variations.

Notably, the PMI index reflects labor shortages, employee absences, and how the Omicron has generally damaged economic growth. As a result of continued struggles and inflation, business confidence declined in January to a three-month low.

Despite fears of inflation, it was at its lowest rate since March 2021. However, a broader picture shows that US companies and citizens are facing record levels of inflation on goods.

Contrary to the doom and gloom of most industries, manufacturing showed signs of promise with growing market confidence and output.

The report summarized: “Soaring virus cases have brought the US economy to a near standstill at the start of the year, with businesses disrupted by worsening supply chain delays and staff shortages, with new restrictions to control the spread of Omicron adding to firms’ headwinds.

“However, output has been affected by Omicron much more than demand, with robust growth of new business inflows hinting that growth will pick up again once restrictions are relaxed.

“Furthermore, although supply chain delays continued to prove a persistent drag on the pace of economic growth, linked to port congestion and shipping shortages, the overall rate of supply chain deterioration has eased compared to that seen throughout much of the second half of last year.

“This has, in turn, helped lift manufacturing optimism about the year ahead to the highest for over a year, and has also helped bring the rate of raw material price inflation down sharply. Thus, despite the survey signaling a disappointing start to the year, there are some encouraging signals for the near-term outlook.”

Although there are encouraging signs, many will be weary of the Omicron variant that has seen job losses, absentees, and a reduction in spending.

Tara Sinclair, an economist at George Washington University discussed the economic outlook with The New York Times, saying: “There are so many potential ways that this could go, we didn’t even agree on where we were going without Omicron, and then you throw Omicron on top.”