U.K. Output Shrinks as Companies Pin Hopes on Recovery Next Year

(Bloomberg) -- U.K. output shrank for the first time since June amid restrictions to slow the second wave of Covid-19.

IHS Markit’s composite Purchasing Managers Index dropped to 49 in November, slipping below the critical 50 mark that signals contraction. A gauge of the dominant services sector fell to 47.6 and jobs were shed at the fastest pace in three months.

While the second lockdown last month was expected to dent growth, the pace of the downturn was less severe than that seen in the spring due to more resilient spending. A decline in new business was largely concentrated in the hospitality, travel and leisure industries.

Businesses were the most optimistic since February as progress on developing vaccines fueled hope that the pandemic will ease and consumer spending return. Around 60% see activity increasing over the next year, compared to 15% predicting a decline.

While consumer-facing firms have been severely impacted “ other types of firms often commented on successfully adapting to the new lockdown restrictions and seeing a reduced impact on client spending than initially expected,” said Tim Moore, economics director at IHS Markit.

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