Drop in private sector activity accelerates - CBI Growth Indicator

Private sector activity declined at the fastest pace since October 2020 in the three months to February. That’s according to the CBI’s latest monthly Growth Indicator.

Consumer services activity fell at their sharpest pace since July 2020 (balance of -76% in the three months to February from -59% in three months to January), while manufacturing output also declined in the three months to February (-8%) after remaining broadly flat last month (-2%).

Activity across business & professional services (-21% from -12%) and distribution (-26% from -14%) also deteriorated at faster rates than the three months to January.

Yet the composite measure – based on 650 responses to CBI surveys between 27 January and 16 February 2021 – found that the pace of decline is set to ease over the coming three months, marking the most optimistic expectations since March 2020.

Business & professional firms expect a return to growth (balance of +15%) which, if realised, would mark the fastest rise since May 2018. Meanwhile, manufacturers anticipate no change in output (-2%) and consumer services firms expect the pace of decline to ease (-55%), albeit remaining very steep. However, distribution firms expect a somewhat sharper deterioration in sales (-36%).

Alpesh Paleja, CBI Lead Economist, said:

“The ongoing lockdown has taken a marked toll on private sector activity, and the outlook remains particularly grim for consumer-facing services firms. However, it’s encouraging to see that business & professional services firms expect to a return to growth in the next three months.

“With last week’s roadmap announcement offering hope of an eventual return to normality, businesses will be looking to the Chancellor tomorrow to take decisive action to help them get through to the other side. Extending business support in parallel to restrictions will help ensure that viable businesses survive, so they can drive a recovery later in 2021.”