27 July 2018
Healthy private sector growth in three months to July
Growth in the UK’s private sector picked up in the three months to July, according to the latest CBI Growth Indicator.
The composite measure – based on 634 respondents across the distribution, manufacturing and service sectors – showed the balance of firms reporting a rise in output at +14%, up from +6% in the three months to June.
The moderate acceleration was driven by a recovery in sales growth for consumer services and distribution – the latter reflecting a pick-up in wholesaling. Manufacturing output continued to grow at a strong pace, but business and professional services growth remained subdued.
Looking ahead, private sector growth is expected to ease slightly in the three months to October (+8%), as consumer services loses steam and manufacturing growth eases, although the latter is expected to remain above its long-term average.
Notwithstanding the small pick-up in the growth indicator in the three months to July, the CBI’s latest economic forecast is for slow but steady growth ahead - as living standards continue to be dogged by weak productivity, and uncertainty holds back business investment.
Rain Newton-Smith, CBI Chief Economist, said:
“Many indicators are pointing to a pick-up in economic growth over the summer, following the bad weather in Q1. Our growth indicator suggests that momentum has held up going into the second half of the year, with warmer weather playing a role.
“Nonetheless, we expect momentum to remain fairly tepid going forward – with living standards still under pressure, and uncertainty holding back business investment. The latter particularly underscores the need to move from ambition to action in the Brexit negotiations. The Government’s White Paper last week showed that it was willing to compromise, and the EU should respond to the UK’s proposals with open minds and flexibility.
“Domestically, it is crucial that businesses and the Government maintain a focus on pursuing productivity improvements, to raise living standards and put the UK’s prosperity on a longer-term footing.”