Private sector stuck in neutral at the start of 2019

Credit: Kzenon

The Private sector activity was unchanged in the quarter to January, according to the latest CBI Growth Indicator.

The composite measure – based on 608 respondents across the distribution, manufacturing and service sectors – showed that the balance of firms reporting growth stood at 0%, the weakest reading since April 2013. The private sector has now failed to register material growth for three months.

The stagnation in overall activity reflects a combination of falling services business volumes, unchanged distribution volumes and slower manufacturing growth. Within distribution, retail volumes continued to decline last quarter, for the third consecutive month.

Limited private sector growth is expected in the three months to April (+6%), with distribution volumes growth set to edge higher (including retail), alongside similar manufacturing growth and unchanged services activity.

The latest CBI Growth Indicator is broadly consistent with slow growth momentum as detailed in our December economic forecast. Underlying conditions remain subdued, with household spending under persistent pressure from squeezed real earnings and Brexit uncertainty restraining business investment.

Rain Newton-Smith, CBI Chief Economist, says: “Our latest growth indicator suggests that momentum in the private sector remains very subdued, having edged down a gear in Q4 2018. Growth is the weakest since 2013, with firms across services and distribution reporting a sluggish performance. Brexit deadlock, diverted investment and low business confidence are hitting firms hard.

“Every business will feel no deal is hurtling closer. Politicians must come together and act at speed to protect the UK’s economy.”