Private Sector Treading Water – CBI Growth Indicator
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Private sector activity remained sluggish in the three months to July (+8%, from +5% in June), according to the CBI’s latest Growth Indicator, with no improvement expected in the quarter ahead.
Sectoral performance was mixed, with activity across business & professional services growing at a quicker pace than the previous month (+19% from +10%), while consumer services activity continued to fall, albeit at a much slower pace (-4% from -41%). However, growth in manufacturing output slowed on the previous month (+6% from +25%), while distribution sales were broadly flat (-3% from +9%).
Looking ahead, firms don’t expect to see any growth at all in private sector activity (0%) over the coming quarter. Manufacturers expect growth to remain weak in the three months ahead (+6%), while consumer services firms expect activity to fall at a largely the same pace as the three months to July (-6%). Growth is expected to ease across business and professional services (+9%), and distribution firms predict a sharp decline in sales (-20%).
Alpesh Paleja, CBI Lead Economist, said:
The CBI Growth Indicator is a composite measure of activity, based on responses to CBI surveys. In total, 538 firms responded between 24 June and 13 July 2022.
“As firms and consumers continue to be buffeted by rising prices, private sector activity has slowed to a near standstill. With the announcement of a further rise in the energy price cap now just weeks away, consumer-facing firms will also be bracing for an even tighter squeeze on household incomes in the months ahead.
“Consumer spending isn’t going to restart the engine on growth this time. Boosting business investment will help to fill the void left by households, but incentives need to be bold, or they won’t scratch the surface.
“As a summer of political drama continues, it’s been encouraging to see both Prime Ministerial candidates, as well as the main opposition party, put the economy front and centre of political debate.”