Private sector activity fell in the three months to October (-15% from -19% in September) marking the third consecutive rolling quarter of decline, according to the CBI’s latest Growth Indicator.
The contraction looks set to continue over the next quarter (-12%).
The fall in economic activity over the last quarter was largely driven by services (-26% from -25% in September), with business volumes in both business & professional services (-19% from -14%) and consumer services (-49% from -57%) shrinking significantly.
Meanwhile, distribution sales rebounded in September (+8% from -13%), with retailing and wholesaling posting strong growth over the past three months.
Looking ahead to the next three months, services are expected to see a slower decline (-17% from -26%), while distribution sales (-16% from +8%) are anticipated to contract once again. The outlook for manufacturing is relatively more optimistic, with growth expected to return to positive territory (+7 from -4%).
Separate data from our surveys also shows that business optimism fell sharply in the quarter to October. Across manufacturing (-48%) and services (-58%), sentiment deteriorated at the fastest pace since the onset of the COVID pandemic in Q2 2020 (-87% and -81% respectively).
Alpesh Paleja, CBI Lead Economist, said: “Notwithstanding a mixed picture across sectors, the private sector continues to face considerable headwinds. Amid rising costs, labour shortages and demand waning, businesses foresee a continued fall in activity over the next three months.
“In this time of economic uncertainty, the essential precondition for a return to growth must be to re-establish macroeconomic stability. Only once firms are able to plan for the future with some measure of confidence will government action to support growth – for example, through reform on business rates and the Apprenticeship Levy – bear fruit.”
