Private sector activity grows at fastest pace in seven years - CBI Growth Indicator

Activity across the private sector grew at the fastest pace since May 2014 in the three months to August, according to the CBI’s latest Growth Indicator.

The composite measure – based on 521 responses to CBI surveys conducted between July 27 and August 17 – saw firms report the fastest growth in activity (+34% from 33% last month) in more than seven years. This is the fourth consecutive month where growth has been above the long-run average.

Consumer services activity was a significant driver of growth, growing at its fastest pace since February 2018 (+30% from +3%). Distribution activity picked up further too (+53% from +48%), while business and professional services growth was broadly stable (+32% from +34%). Meanwhile, growth in activity within the manufacturing sector slowed (+22% from +37%).

Private sector activity is expected to grow at a faster pace than the long-run average in the coming quarter. However, the pace of growth is expected to ease.

Distribution firms in particular anticipate a slower rate of growth (+41%), the business & professional services sector expects a similar rate (+30%), and manufacturers predict a slight acceleration in the rate of growth (+26%).

Within consumer services, however, a fall in volumes is predicted over the next three months, driven primarily by the hotels, restaurants and bars sub-sector.

Anna Leach, CBI Deputy Chief Economist, said:

“Strong cross-sector growth throughout the summer months is welcome given the backdrop of supply chain disruption. However, there are several issues creating headaches for business, which must not be ignored if we are to regain lost economic ground before the end of the year.

“As COVID restrictions have lifted, evidence of labour shortages has been growing – in some cases, these shortages are having a material impact on operations. Meanwhile, disruption to global supply chains during the pandemic has led to sharp rises in material and shipping costs, adding further pressure.

“It is unclear how long these labour and materials shortages will persist, given spare capacity still remains in the economy. Recent isolation rule changes will help ease some of the pressures on overall labour availability. For specific skilled occupations, like HGV drivers, a temporary extension of the shortage occupations list on immigration would help to further secure the UK’s economic recovery.”