Private sector growth strengthens in the three months to August – CBI growth indicator

UK private sector growth picked up in the three months to August, according to the latest CBI Growth Indicator.

The composite measure – based on 698 respondents across the distribution, manufacturing and service sectors – showed the balance of firms reporting a rise in output at +19%, up from +14% in the three months to July.

This pick-up in growth was driven by stronger growth in business & professional services and distribution, with retail volumes growing at the fastest pace in a year. Growth slowed in manufacturing and consumer services but remained above the long-run average in both sectors.

Looking ahead, private sector growth is expected to ease over the three months to November (+13%), reflecting slower growth in business & professional services and distribution. Manufacturing and consumer services growth is tipped to be steady next quarter.

Notwithstanding the pick-up in growth in the three months to August, the CBI indicator continues to point to tepid growth ahead, consistent with the CBI’s latest economic forecast for slow but steady growth. Household spending remains under pressure from squeezed real earnings and uncertainty continues to restrain business investment.

Rain Newton-Smith, CBI Chief Economist, said: 

“It’s encouraging that private sector growth has strengthened over the last quarter, signalling decent activity in Q3 so far. However, as the boost from the hot summer fades, we expect to see a return to more subdued growth for retailers as consumer incomes struggle. And while manufacturers continue to be supported by healthy global demand and the weak pound, the threat of escalating trade tensions and uncertainty around Brexit hang over the outlook.

“In this climate of uncertainty, we need action to get the UK economy on the front foot. The UK’s congested transport network needs unclogging to help unlock growth across the UK’s regions and nations. Increasing the funding available for practical, local infrastructure projects and reducing funding fragmentation could help lift productivity and prosperity.”

Notes to Editors:

The CBI Growth Indicator is a composite of data on output, sales and business volumes drawn from three of the CBI’s long-running qualitative UK business surveys: the Industrial Trends Survey (ITS, covering manufacturing); the Distributive Trades Survey (DTS, covering retail, wholesale and motor trades); and the Service Sector Survey (SSS, covering business, professional and consumer services).

The Growth Indicator covers the volume of output for the ITS, volume of sales for the DTS and volume of business for the SSS for the past three months and next three months.

A ‘balance’ is the difference in percentage points between the weighted percentage of firms answering that output is “up” and the percentage answering “down” (for example, if 30% of firms say that output is up, 60% that it is unchanged, and 10% that it is down, the balance statistic is +20%).