Ten successive rolling quarters of decline halted as private sector activity stablises - CBI Growth Indicator

Activity stabilised across the private sector, after falling for ten consecutive rolling quarters (+0% from -10% in May). Looking ahead to the next three months, private sector activity is set to grow marginally (+4%).

But performance across sectors was mixed. Services recorded a mild increase in business volumes for the first time since July 2022 (+4% from -8% in May). However, manufacturing (-6%) and distribution (-7%) both experienced mild contractions, though at a slower pace than in May.

Activity is expected to grow marginally in the next three months (+4%), reflecting a pick-up in most sectors – in particular, expectations in consumer services (+11%) are at their strongest in fifteen months. Distribution is the exception, where sales are set to fall at a faster pace (-13%).

BUSINESS VOLUMES RECOVER – CBI SERVICE SECTOR SURVEY

Business volumes across the service sector returned to growth in the quarter to June, for the first time since July 2022. Business & professional services volumes grew marginally, while consumer services volumes were broadly unchanged (after having fallen for a full year).

The outlook for services activity over the next three months is encouraging, with volumes looking set to grow at a faster pace in both business & professional and consumer services. At the same time, expectations for average selling price growth in both sectors remain strong, but nonetheless below the highs seen last summer.

Key survey figures for this month include:

• Business & professional services: Volume of business +4%; Numbers employed +6%
• Consumer services: Volume of business +3%; Numbers employed +16%

Looking ahead to the next three months…

• Business & professional services: Volume of business +9%; Numbers employed +14%; average selling prices +24%
• Consumer services: Volume of business +11%; Numbers employed +15%; average selling prices +32%.

Alpesh Paleja, CBI Lead Economist said:

“Our latest surveys point to continued resilience in the private sector. Activity appears to be gradually gaining momentum, despite persistent cost pressures, more restrictive financial conditions, and a tight labour market. But at best, growth is still only very sluggish. The CBI’s latest economic forecast suggests that 2023 will be another tough year for both businesses and households, before a more meaningful pick-up in growth next year.

“However, our forecast also continues to flag longer-term weakness in the UK economy, particularly in productivity and business investment. Making our business environment more attractive to firms at home and abroad should be front of mind at present, with a particular focus on boosting confidence to invest and decarbonise.”