(Bloomberg) -- U.S. business activity came close to stalling in early January, depressed by lingering capacity constraints and a wave of coronavirus infections that deflated demand. 

The IHS Markit flash December composite purchasing managers index slid 6.2 points to an 18-month low of 50.8, the group reported Monday. Readings above 50 indicate growth. The group’s gauge of services also plummeted to the lowest level since July 2020 as labor shortages and employee absences weighed on activity.

The manufacturing index suffered a more modest decline, yet the reading was the weakest since October 2020 as supply chains remained in disarray and hampered production.

“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,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

Furthermore, while supply-chain constraints are lingering, the report showed they are gradually starting to ease, helping explain why the group’s measure of future output climbed to the highest in more than a year.

The composite index of materials prices also registered a sharp decline, indicating cost increases were less severe, yet still well above levels seen prior to 2021.

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