Omicron Impacts Economic Growth Globally As Service Providers Continue To Struggle

Start Trading

Economic growth globally has hit a major roadblock and has been struggling since late last year, in December, as the new wave of Covid Omicron variant has reduced productivity globally as infection rates increase and casualties continue to rise.

The first wave of the pandemic that took the world in a storm in 2019 saw massive global economic devastation due to the year-long lockdown most nations fielded to combat the virus. However, since the development of the vaccine and the gradual lifting of the ban on social gatherings, the economy across countries globally has started to recover. 

The global economic world post-Covid-19 then saw the development of sectors like the cryptocurrency industry and the manufacturing sector globally.

As the world economy continues to heal from its wounds, the arrival of the Omicron variant in December has sidelined virtually all the progress the economic growth features globally in 2021. The new wave came just as the manufacturing sector started recording steady delivery records and all-time high reduction of supply constraints, with demand being proportionally high as well.

Global Economic Growth Pre and Post Omicron

Using the Purchasing Managers’ Index (PMI) compiled by the JP Morgan group, inferences can be drawn to indicate the growth process of the global economy before and after the Omicron wave of COVID-19.

The PMI, in essence, is an economic indicator that is derived from monthly surveys of private sector companies that indicate the overall and prevailing direction of economic trends in manufacturing and service sectors globally.

Economic growth significantly slowed down globally in the last two months of 2021 amid the rising number of Omicron infections and casualties. The PMI dropped from a robust 54.8 in early November to 54.3 in December, an all-time quarterly low.

The year-long data chart indicated an average quarterly growth of global GDP by approximately 3-3.5%. The exception, however, is the fourth quarter of 2021; while it fielded a robust growth overall, the growth in this period was still subpar to the growth surge the second quarter fielded.

The major lookout to watch for as the year 2022 begins will be whether the new variant will continue to impact growth negatively and further destabilize supply chains once again, just as the manufacturing sector is recovering fully from the first wave of 2019.

Omicron Devastates Service Sector; Manufacturing Sector Enjoys A Successful Year-End

The butterfly effect that the Omicron variant has on the service-providing sector that has seen the sector all but come to a standstill globally has effectively reduced PMI, as evidenced in the three months all the low that ended 2021

On the other hand, the manufacturing sector experienced rapid growth in the second half of last year, since July, which was still below the growth margin of the services sector. 

The edge that the service sector had over the manufacturing sector for most of the year could be attributed to the former’s boost after the reopening of economies post Covid-19 leveraged lockdowns globally, while the manufacturing sector suffers from supply constraints due to the inherent complexity of the sector.

However, the omicron variant brought about a significant reversal in the two sector’s position as the virus’s increase in infection and casualties rate resulted in the reinstatement of movement restrictions voluntarily and imposed in most countries in December. This has led to the slow movement of face-to-face services. On the other hand, manufacturers have reported the relaxation of their supply constraints and increased demand and orders for consumers globally.

Start Trading

Leave a Comment

1 Institute Trade Blog | All Rights Reserved 2022 | Disclaimer | ✉ Contact