Private sector volumes set to fall sharply, as Covid-19 impact becomes apparent - CBI Growth Indicator

Private sector activity fell again in the three months to March, albeit at a slower pace than last month (-4% from -7%), according to the CBI’s latest monthly Growth Indicator. However, volumes in some sectors are set to fall sharply in the next three months, with expectations in these areas at their weakest since 2009.

The composite measure, based on 626 respondents, shows the seventeenth consecutive rolling quarter of flat or falling volumes. Private sector volumes are also expected to fall at similar pace over the coming quarter (-5%).

However, the Growth Indicator highlights the early impact that coronavirus is having on different sectors of the economy. Consumer services reported the sharpest fall in volumes since December 2012 (-26%, from -17% in February) and expect a much larger fall in the next quarter (-47%) – the worst expectations since March 2009.

Manufacturers reported the tenth consecutive rolling quarter of flat or falling output (-8% from -11%) and also expect a significant fall in the next quarter (-20%) – the most negative expectations since April 2009 (-20%).

The data does show that food & drink retailers reported strong growth, counteracting weakness in other areas of retail (-4% from -16%). However, retailers are also feeling gloomy about future growth, with expectations for the decline in sales (-31%) the lowest since March 2009. Other aspects of distribution fared better however, with overall sales in the sector rising very slightly (+4% from +3%; exp -5%).

Elsewhere, business & professional services volumes were flat (0% from -6%), but this marked the best performance since October 2018, and expectations are for growth in the coming quarter (+15%).

Alpesh Paleja, CBI Lead Economist, said:

“This month’s Growth Indicator highlights the early impact of coronavirus on the economy, and expectations of a sharp fall in activity give some sign of what is to come. With strict social distancing measures still to be reflected in our data, the picture is only likely to deteriorate from here.

“Ensuring businesses remain solvent and people remain employed will be essential in securing a quick economic recovery once these measures are lifted. We are supportive of the robust support packages in place so far, but government must remain conscious of being agile in response to changing conditions, and getting ahead of any further economic hit.

“Meanwhile businesses will continue to face the circumstances with resilience: contributing to the national effort to keep people safe where possible, and ensuring the NHS and other essential goods and services reach the people who need them most.”