Private Sector Gears Up For Growth Over The Coming Quarter - CBI Growth Indicator

Private sector activity fell in the three months to May (-10% from -7% in April), marking the tenth consecutive rolling quarter of decline, according to the CBI’s latest Growth Indicator.

All major subsectors saw activity fall over the last quarter. Services business volumes declined at a broadly similar pace to last month (-8% from -7% in April), reflecting a mild contraction in business & professional services (-4%) and a sharper fall in consumer services (-24%).

Distribution sales resumed their downward trend after two flat months (-17% from +1% in April), falling at the fastest pace since November 2022. Likewise, manufacturing output continued to fall, but at a slightly slower pace than last month (-10% from -15% in April).

Looking ahead to the next three months, private sector activity looks set to rebound with a return to modest growth (+8%). Business and professional services are expected to lead the recovery with an upswing in activity (+20%), while consumer services activity and distribution sales are expected to stabilise (-3% and -1% respectively). Only manufacturing output is expected to fall, but at a slower pace once again (-5%).

Alpesh Paleja, CBI Lead Economist, said:

“Amid the enduring headwinds of strong cost pressures and labour shortages, it’s clear that the private sector continues to face difficult trading conditions. However, the latest Growth Indicator shows that businesses remain hopeful of seeing activity rebound over the three months ahead.

“Falling wholesale energy prices will eventually relieve some pressure on firms’ margins, while lower household energy bills from July will support consumer spending, in turn giving a boost to broader demand conditions.”

The CBI Growth Indicator is a composite measure of activity, based on responses to CBI surveys. In total, 725 firms responded between 2 May and 16 May.