UK private sector growth holds steady in October

UK private sector growth was steady in the quarter to October, according to the latest CBI Growth Indicator.

The composite measure – based on 657 respondents across the distribution, manufacturing and service sectors – showed the balance of firms reporting a rise in output at +10%, the same as in the three months to September.

This rise was driven by healthy growth in business & professional services and distribution. Meanwhile, consumer services volumes fell slightly last quarter.

Looking ahead, private sector activity is expected to continue to grow at a similar pace over the three months to January, due to a solid expansion in services. However, growth in retail is expected to weaken, while manufacturing growth is set to stall next quarter with new orders weak.

The CBI Growth Indicator is consistent with slow and steady growth momentum as detailed in our June Economic Forecast, albeit with a somewhat better recent performance from consumer-facing companies helped by the warmer weather over the summer.

Underlying conditions remain lacklustre, with household spending under pressure from squeezed real earnings and uncertainty restraining business investment.

Rain Newton-Smith, CBI Chief Economist, said:

“Growth has settled down on a more subdued path after the summer boost, with momentum across most sectors. Although steady growth is expected next quarter, there are signs of weakness emerging within distribution and manufacturing.

“To help businesses invest more in buildings, skills and new technologies, firms will welcome the Chancellor’s action through the improved Annual Investment Allowance and changes to the Apprenticeship Levy.

“Yet the outlook remains shrouded in Brexit uncertainty. It is no surprise that more companies are implementing contingency plans as the likelihood of a ‘no deal’ Brexit persists, so getting a deal soon is of paramount importance.”