Private sector activity expected to flatline over next three months, reports CBI
By Matt Hall | 6th June 2022
Private sector activity is expected to be broadly flat in the three months to August (+one per cent), marking the lowest expectations for private sector growth since February 2021. That's according to the CBI's latest Growth Indicator.
Within this, manufacturing output growth is expected to remain solid (+23 per cent). business and professional services activity (-one per cent) and distribution sales (+three per cent) are expected to be broadly flat, while consumer services activity is expected to fall (-23 per cent).
Our latest business surveys also show a sharp deterioration in optimism over the three months to May, across all key sectors. The fall in confidence among manufacturers (-31 per cent) and business and professional services (-21 per cent) was the sharpest since mid-2020.
Expectations for the next three months contrast with reported growth in the three months to May, which picked up slightly to a six-month high (+23 per cent, from +19 per cent in April).
Both business & professional services activity (+28 per cent from +22 per cent) and manufacturing output (+30 per cent, from +19 per cent) saw faster rates of growth. Distribution volumes grew at a similarly solid pace to last month (+23 per cent, from +25 per cent), whilst consumer services output remained broadly flat (zero per cent, from +three per cent).
Alpesh Paleja, CBI lead economist, said: "It's worrying that expectations for private sector activity have worsened, but unsurprising given that headwinds continue to intensify. With the cost-of-living crisis front of mind, consumer services firms will particularly be feeling the squeeze in the coming months and beyond.
"The Chancellor's new targeted support package for low-income households is the right thing to do and will help people facing real hardship. But addressing faltering business confidence will require more action.
"Amid a worsening economic outlook, the government must work with business on a genuine plan for increasing business investment and get growth going again, particularly as costs continue to soar."
A supplementary question this month asked what actions, if any, businesses were taking and/or planning to take to strengthen supply chain resilience in response to ongoing global supply disruption. The most common response was holding higher levels of inventories temporarily, which a majority of manufacturers (68 per cent) and distribution firms (59 per cent) are doing or planning to do, while around a quarter (23 per cent and 24 per cent respectively) were doing so on a permanent basis.
The second most cited option was to diversity supply chains (48 and 36 per cent). By comparison, onshoring (11 and five per cent) or nearshoring (eight and five per cent) part or all of operations were the least popular options.
Related Articles
Copyright 2024 Moose Partnership Ltd. All rights reserved. Reproduction of any content is strictly forbidden without prior permission.