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Private sector activity falls in November - CBI Growth Indicator
Private sector activity continued to fall in the three months to November, (weighted balance of -11%, from -7% in October) with no sign of any let-up over the coming quarter, according to the CBI’s latest Growth Indicator.
The latest decline shows that activity has now contracted (-11%) for the last sixteen rolling quarters. All three major sectors reported weaker activity compared with three months prior. Services business volumes continued to fall modestly in the three months to November (-9% from -7% in October), with falling volumes reported in both the business & professional (-9%) and consumer (-5%) services subsectors. Manufacturing output (-17% from -6% in October) and distribution sales (-10% from -7% in October) also declined in the three months to November.
Despite stagnating business volumes over the last year, services firms still plan to expand employment in the quarter to February (+8%), though hiring looks set to be driven entirely by business & professional services (+12%). Meanwhile, services firms report that selling prices will continue to rise over the same period (+14%), though inflation expectations are at their lowest since June 2021.
Looking ahead, private sector activity is expected to remain broadly unchanged over the next three months (-3%). Services volumes look set to remain stable (0%), broadly offsetting mild contractions in distribution sales (-6%) and manufacturing output (-7%).
Alpesh Paleja, CBI Lead Economist, said:
“November’s Growth Indicator points to continued sluggishness in underlying growth momentum. Widespread weakness is indicative of the broad headwinds facing the UK economy with demand squeezed by high interest rates and inflation while staff and skill shortages hold back businesses operations. Investment has become challenging under these conditions, but it is the best way to boost productivity and ultimately revive economic growth.
“The Chancellor’s decision to make full capital expensing a permanent feature of the tax system represents a significant step towards breaking the UK’s low growth cycle. However, expanding the UK economy’s productive capacity will also require a healthy and able workforce. A focus on occupational health to support people back into work and prevent ill-health could be bolstered by making Employee Assistance Programmes tax free.”
