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Private sector activity declines at sharper pace as consumer sectors brace for worse ahead

Private sector activity fell at a faster pace in the three months to October (balance of -29% from -23% in September) according to the CBI’s latest monthly Growth Indicator.

The composite measure, based on 670 respondents (between 25 September and 15 October 2020), saw a sharper decline in activity for both business & professional services (-40% from -28%) and consumer services (-45% from -39%) firms. Distribution sales also fell (-12%), after a brief period of stabilisation last month (-1%). In contrast, manufacturing activity fell at a slower rate compared to the previous rolling quarter (-8% from -20%).

The overall pace of decline is in private sector activity is expected to ease slightly over the next three months (-23%), albeit remain significant. It’s anticipated that this will be driven by a return to growth in manufacturing activity (+15%) and a slower fall in business & professional services activity (-27%). The outlook is, however, less positive for consumer facing sectors; with both consumer services (-59%) and distribution (-22% from -12%) activity expected to decline at a quicker pace over the next three months – the latter driven by deterioration in retail and motor trades.   

A supplementary question found that private sector activity was down 22% compared to normal conditions (i.e. in the absence of the pandemic). This has deteriorated on last month, when activity was cited to be 16% below normal levels.

Alpesh Paleja, CBI Lead Economist, yesterday said:

“It’s clear that new restrictions coming into force across the country have left their mark on private sector activity. This is the first time since June that the pace of decline in activity has picked-up.

“Divergence in performance across sectors is also re-emerging. Expectations of a return to growth for manufacturers stand in contrast to retailers and other consumer-facing sectors, who will be bracing for more tough weeks ahead.

“The Chancellor’s Winter Economy Plan and recent intervention on wage support have been welcomed by business. But with the pandemic still ongoing and restrictions on activity growing, many firms and jobs remain at risk. Specific sectors will need close attention as we move further into the challenging winter period.”

 

Original article link: https://www.cbi.org.uk/media-centre/articles/private-sector-activity-declines-at-sharper-pace-as-consumer-sectors-brace-for-worse-ahead/

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