The latest CBI Growth Indicator reported that UK private sector activity in the quarter to February was flat for the second month in a row. The major trends behind the stagnation in activity were falling business volumes in the services sector - with a notable decline in business & professional services – and a slowdown in manufacturing growth. Meanwhile, retailers (which are part of the overall distribution sector) saw sales volumes fall for the fourth rolling quarter in a row in February. Looking ahead, private sector activity is expected to fall slightly over the three months to May, with services volumes set to fall at a sharper pace alongside continually slow manufacturing growth.
Chiming with CBI business surveys, the latest IHS Markit/CIPS PMIs also reported near-stagnant activity in February. The composite PMI suggested that the UK grew slowly in February (albeit edging higher on January), driven by weak activity in both the services and manufacturing sectors. Additionally, the construction PMI (which isn’t included in the composite measure) declined for the first time in almost a year.
Recent surveys reported various data that provide evidence of how challenging trading conditions, including Brexit uncertainty and a gloomy global background, are affecting businesses. The latest CBI Service Sector Survey reported that business sentiment in both business & professional and consumer services fell at the fastest rates since the financial crisis and EU referendum, respectively, in the quarter to February. Additionally, the February quarterly CBI Distributive Trades Survey showed that retailers’ investment intentions for the year ahead were at their weakest since February 2012. Meanwhile, the PMIs reported that manufacturers’ input inventories were at a survey-record high, which was widely attributed to stockpiling of raw materials in face of continued Brexit uncertainty. Employment in services, manufacturing, and construction – as reported by the PMIs – fell at its fastest rate in nine years, while business optimism sunk to its lowest level since the EU referendum.
UK consumers also seem to be feeling the hit from tepid growth and political uncertainty. According to the February GfK consumer confidence index, consumer confidence remains negative, driven by concerns about the economy in the year ahead. That being said, the index has not (yet) seen a sharp drop in confidence, like the one reported following the EU referendum.
For more information please contact Martin.Sartorius@cbi.org.uk