Private sector growth slows in three months to January - CBI Growth Indicator

Private sector growth eased for the second consecutive survey in the three months to January (balance of +12% from +21% in three months to December). This is the slowest rate of growth since the three months to April 2021, according to the CBI’s latest Growth Indicator.

Only the distribution sector saw faster growth than the previous rolling quarter (+38% from +21%). Growth in manufacturing output (+14% from +29%) and business & professional services volumes (+9% from +16%) eased, while consumer services activity fell for the first time since the three months to June 2021 (-23% from +23% in December).

Private sector activity is expected to grow at a similarly modest pace in the next three months (+10%), marking the lowest expectations for growth since the quarter to February 2021.

Looking ahead, manufacturers (+23%) and business & professional services firms (+15%) expect a faster rate of growth in the next three months. Distribution firms expect growth to ease slightly (+33%), while consumer services activity is expected to fall at an even faster rate (-53%).

Alpesh Paleja, CBI Lead Economist, said:

“Private sector growth weakened substantially across most sectors in the quarter to January, and expectations for the three months ahead have softened notably.

“Consumer services have borne the brunt of Plan B restrictions and general Omicron caution, with activity here shrinking sharply. Consumer-facing firms will also have to content with a deepening squeeze on household budgets, as rising energy prices and, more broadly, higher inflation start to bite. Expanding the Warm Home Discount and cutting VAT from consumer energy bills for 2022 can help ease pressure on the most vulnerable.

“To ensure businesses are well placed to support the recovery and compete globally, maintaining and expanding their access to the Recovery Loan Scheme is essential, as is compensation for Energy Intensive Industries for indirect emissions costs.”