Private sector activity falls at a sharper pace

Anna Leach, CBI
Private sector activity continued to fall in the three months to October (-11%), at a sharper pace than in the previous rolling quarter, according to the CBI’s latest monthly Growth Indicator.

The composite measure, based on 507 respondents, reported the twelfth consecutive rolling quarter – equivalent to a full year – of flat or falling volumes. The deterioration in this month’s survey reflected a sharp decline in manufacturing output and consumer services business volumes, coupled with a further drop in retail sales and business and professional services volumes.

Looking forward, private sector activity is expected to drop at a faster pace in the quarter to January 2020 (-17%) – the weakest expectations since December 2011, though very close to last month’s expectation (-16%). This reflects expectations of a faster decline in manufacturing and business and professional services volumes, alongside a continued fall in consumer services volumes. Retail sales are expected to stabilise.

Across the economy more broadly, growth has been volatile during 2019, driven by shifting activity in response to moving Brexit deadlines. We expect the economy to grow modestly in the event of a smooth transition to a new Brexit deal, with the longer term economic impact dependent upon the details within the final deal.

Anna Leach, CBI Deputy Chief Economist, said: “The squeeze on the private sector continues to tighten, with our growth indicator showing that volumes have been flat or falling for a full year. And with expectations for activity at their lowest in nearly eight years, it’s clear businesses are worried about the future.

“The drops across the manufacturing, retail and dominant services sector, paired with the hugely damaging effect of Brexit uncertainty, are ingredients for a perfect storm for British firms.

“The General Election is an opportunity for all parties to present their visions for the UK’s future. Passing a good deal with the EU is the first step. Then the real heavy lifting can begin, building a future relationship with our biggest trading partner. Ending political instability will enable a renewed focus on domestic priorities, which will give the economy the boost it needs.”