Expectations for private sector growth improve further - CBI Growth Indicator

Private sector activity is expected to grow strongly in the next three months (balance of +32% from +24% last month) marking the strongest predictions for growth since June 2015, according to the CBI’s latest monthly Growth Indicator.

Expectations among business & professional services firms (+48%) and manufacturers (+36%) are at their strongest since April 2014 and March 2017 respectively. Expectations for growth in distribution sales are at their highest since February 2020 (+15%). Meanwhile, consumer services firms have tempered their expectations relative to last month, and now expect activity to remain flat in the next three months (+1% from +10%).

The composite measure – based on 574 responses to CBI surveys between 24 March and 15 April 2021 – also found that private sector activity was flat over the last three months (+1%, from -13% last month). This marked the first time in almost two years that activity has not fallen.

Over the past three months, business & professional services firms reported a marginal rise in activity (+5%, from -5%). Meanwhile, manufacturing (+3% from +3%) and consumer services activity (-2% from -38%) were broadly flat – for the latter, this was the first time that business had not fallen since September 2019. Sales volumes across the distribution sector (-8% from -23%) continued to fall, but at a notably slower rate.

Alpesh Paleja, CBI Lead Economist, said:
“Economic growth appears to be poised for lift-off over the summer. But this is a recovery that will be felt differently across sectors: while the outlook has improved considerably across the business & professional services and manufacturing sectors, consumer-facing firms seem to anticipate trouble in getting off the ground.

“The government can ensure reopening is a success by continuing to support businesses getting back on their feet and making the transition to a post-Covid world a smooth one – particularly for those firms that are likely to continue struggling. Boosting competitiveness must also remain a priority over the long-term.”