CBI: Private sector growth strengthens during summer months

The summer months saw a steady increase in private sector growth, according to the latest CBI Growth Indicator.

Based on 698 respondents across the distribution, manufacturing and service sectors; the most recent CBI Growth Indicator showed that the balance of firms reporting a rise in output was +19% in the three months to August, up from +14% previously.

The Confederation of British Industry (CBI) has said that the increase is being driven by professional services and distribution, with retail volumes growing at the fastest pace all year. Growth slowed in manufacturing and consumer services however, but remained above the long-run average across both sectors.

In the near future, private sector growth is expected to ease over the three months to November (+13%), reflecting slower growth in professional services and distribution. Manufacturing and consumer services growth is tipped to remain steady next quarter.

While this is good news for the UK economy, the CBI indicator continues to point towards tepid growth, consistent with the confederation’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.

“It’s encouraging that private sector growth has strengthened over the last quarter, signalling decent activity in Q3 so far,” said CBI Chief Economist Rain Newton-Smith. “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.”

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