Private sector activity continued to fall in the three months to September (-6%), at the same pace as the quarter to August, according to the CBI’s latest monthly Growth Indicator.
The composite measure, based on 567 respondents, reported the 11th consecutive rolling quarter of flat or falling volumes. This month’s result reflected a sharper decline in business and professional services, coupled with falling retail sales.
Looking forward, private sector activity is expected to drop at a faster pace in the quarter to December (-16%) – the weakest expectations since December 2011.
The decline is driven by expectations of falling activity across all sub-sectors: manufacturing, business & professional services, consumer services and distribution. Within distribution, retail volumes are also expected to fall albeit at a slower pace.
Across the economy more broadly, GDP growth has been volatile in the first half of 2019, driven by companies stockpiling ahead of previous Brexit deadlines and a change in the timing of car plant annual shutdowns. If we can avoid a no-deal Brexit, we expect the economy to grow modestly further ahead, with living standards rising thanks to a pick-up in wage growth and low inflation. However, a no-deal Brexit would likely hit activity and financial markets significantly. For more detail, see our July economic forecast.
Rain Newton-Smith, CBI Chief Economist, said: “Decision-makers in boardrooms across the country have been watching politics this week with a heavy heart.
“Despite all the noise, what must not be forgotten is the importance of getting the UK economy back on track, by supporting investment and innovation which is the bedrock of productivity, and higher living standards.
“While the Spending Review provided improved investment in education to help pupils prepare for the workplace of the future, warm words on infrastructure urgently need backing up with more detail, particularly on how the UK will move to a net-zero carbon economy.
“Above all, getting a deal that can pass through Parliament, is acceptable to the EU and protects our economy remains the goal. Exiting the EU without a deal will only extend uncertainty, damage our economy and dent hopes of progress on domestic policy.”