Private sector volumes fall again in the three months to February - CBI Growth Indicator

The composite measure, based on 631 respondents, reports the sixteenth consecutive rolling quarter of flat or falling business volumes. Total services saw a slower rate of decline (-9% from -12%) as a further deterioration in consumer services (-17% from -5%) was offset by a slower fall in volumes in business & professional services (-6% from -14%).  Manufacturing output also fell at a slightly slower pace (-11% from -15%), whilst distribution volumes were flat after a sharp decline last month (3% from -30%). Within distribution, growth in wholesaling was offset by stagnant motor trade sales, and falling retail sales. However, the decline in retail was at a much slower pace than in January (-16% from -55%).

Looking ahead, private sector volumes are expected to grow at an above average rate in the coming quarter (+17%). Consumer services activity is expected to be broadly flat in the quarter ahead (+1%). Business & professional services (+26%) and total distribution (+15%) are expected to grow at an above-average rate – though within the latter, retail sales are expected to be flat (-3%). Manufacturing output is expected to grow modestly (+8%).

According to the CBI’s December economic forecast, UK growth looks set to improve gradually over the next couple of years, on the assumption that uncertainty around the UK’s future relationship with the EU gradually lifts and global growth revives. GDP is forecast to grow by 1.2% in 2020, picking up to 1.8% in 2021. For more detail, see our December economic forecast.

Alpesh Paleja, CBI Lead Economist, said:

“The decline in private sector activity is slowly easing, but we’re not seeing a more substantial bounce. Nonetheless, businesses are hopeful of growth returning over the coming quarter.

“The wider backdrop remains one of an improvement in sentiment and investment plans. A pro-enterprise Budget that invests in skills, infrastructure and innovation will reassure businesses that the Government is committed to long-term growth - hopefully ensuring that the feel-good factor feeds through to a pick-up in output and sales.”