Private sector growth expectations soften – CBI Growth Indicator

Private sector firms expect a slight rise in activity over the next three months (weighted balance of +4%), according to the CBI’s latest Growth Indicator, However, the survey also shows that firms are less optimistic about growth than they were earlier this year.

Activity is expected to be driven by modest growth in manufacturing (+13%) and services (+5%). Within the latter, business & professional services volumes are set to rise (+10%), while consumer services activity is anticipated to fall (-12%). Distribution sales are also expected to fall slightly in the three months to September (-5%).

This comes after private sector activity resumed contraction in the three months to June (-7%), following a stabilisation in May (+2%). The renewed fall was generally broad-based across sectors.

Alpesh Paleja, CBI Interim Deputy Chief Economist, said: 

“While it’s encouraging that expectations for growth remain positive in our surveys, we also have to acknowledge that they have softened compared to earlier this year. That underscores the stop-start nature of our economic recovery and is a picture we see further reinforced by private sector activity falling over the past three months and the varied picture across sectors.

“While our data suggests that some momentum should be sustained over the coming months, the fragile nature of the recovery means that whoever wins the General Election will need to be fully focused on growth from day one. That means shifting gears immediately from ambition to action and doubling down on support for business as the engine of growth, opportunity and prosperity.”

Key findings from our monthly Services Sector Survey showed:

• Business volumes in the services sector fell modestly in the three months to June (-11%), after being unchanged in May (-1%). Within this, business & professional services volumes contracted marginally (-5%), following growth in the three months to May. The pace of decline in consumer services volumes accelerated further (-31%), marking six consecutive rolling-quarters of falling volumes.
• However, hiring intentions within the services sector are holding up. Both business & professional services (+14%) and consumer services (+10%) companies expect headcount to rise modestly over the next three months.
• Price growth expectations for services firms were broadly unchanged in June (+10% from +13% in March), standing marginally above their long-run average (+7%). This was driven by somewhat lower inflation expectations in consumer services (+17% from +23%), while business & professional services expectations were little changed from last month (+8% from +11%).