Latest CBI monthly services sector survey and growth indicator

WEAKNESS IN SERVICES AND DISTRIBUTION LEADS FALL IN PRIVATE SECTOR ACTIVITY – CBI GROWTH INDICATOR 

Activity across the private sector fell in the three months to July (weighted balance of -6%, from 0% in June), according to the CBI’s latest growth indicator. This was largely driven by weakness across the non-financial services and distribution sectors.

Business volumes in the services sector fell (-8% from +4%), reflecting a particularly sharp decline in consumer services (-34%). Distribution sales continued to fall at a similarly modest pace to the previous month (-6% from -7%), while manufacturing output stabilised (+3%), following five rolling quarters of decline.

Looking ahead to the next three months, private sector activity is expected to remain flat (-3%). While it’s anticipated that manufacturing will return to growth (+9%), activity across both services (-5%) and distribution (-9%) is expected to contract slightly again.

SHARP DECLINE IN CONSUMER SERVICES DRIVES FALL IN SERVICE SECTOR VOLUMES – CBI SERVICE SECTOR SURVEY 

Business volumes in the service sector fell moderately in the three months to July, after a brief period of growth in June. Within this, business & professional services firms saw volumes stall, while consumer services volumes declined rapidly. Hiring activity was similarly mixed between sub-sectors in the three months to July, with employment increasing in business & professional services and falling in consumer services.

Services activity is expected to remain relatively poor in the next three months. Total services volumes are set to fall at a broadly similar pace, reflecting a slower (but still significant) decline in consumer services, and continuing stagnation in business & professional services.

Key survey figures for this month include:  

• Business & professional services: Volume of business -2%; Numbers employed +7%.
• Consumer services: Volume of business -34%; Numbers employed -8%.

Looking ahead to the next three months:  

• Business & professional services: Volume of business -2%; Numbers employed +17%; average selling prices +13%.
• Consumer services: Volume of business -19%; Numbers employed -4%; average selling prices +32%.

 Alpesh Paleja, CBI Lead Economist, said:  

"While UK growth has been resilient so far, our latest surveys underscore just how fragile its foundations are. Demand conditions remain uncertain, particularly in consumer services, amid headwinds from labour shortages and rising interest rates.

“While we expect a more meaningful pick-up in growth in the months ahead, the economy still faces long-standing challenges. Against a tight fiscal backdrop, delivering sustainable growth remains imperative for businesses and policymakers alike. As a first step, we need to focus on low-cost improvements to the tax and regulatory environment so that businesses can invest and decarbonise with confidence.”