Private sector activity continues to decline, but at a slower pace

Alpesh Paleja, CBI Lead Economist,

Private sector activity fell in the three months August, but at a slower pace than last month (-39% from -57%), according to the CBI’s monthly Growth Indicator. This is the second consecutive month where the pace of decline has eased from the survey record low in the three months to June (-71%).

The composite measure, based on 668 respondents (who replied to CBI surveys between 27th July to 14th August 2020), saw business and professional services activity (-32% from -50%), consumer services activity (-64% from -88%), distribution sales (-26% from -47%) and manufacturing output (-46% from -59%) all continue to fall significantly, but at a slower pace than last month.

Looking ahead, the pace of decline is expected to ease once again over the next quarter (-11%): reflected in predictions of a slower fall in consumer services (-42%), distribution (-11%) and manufacturing (-10%). Meanwhile, business and professional services expect business volumes to stabilise in the three months to November (-1%).

Alpesh Paleja, CBI Lead Economist, said: “The fall in private sector activity has continued to slow, as more firms reopen for business. Nevertheless, activity remains well below “normal” levels, and recent CBI surveys have revealed heavy job cuts across the economy.

“Clearly, we aren’t out of the woods yet. The next few months mark a crunch point for businesses, with cash flow issues biting, the risk of a second wave and uncertainty over the outcome of Brexit negotiations. A bold plan is needed for all of these issues, in order to establish a sustainable economic recovery.”