Growth in the UK’s private sector slowed slightly in the three months to June 2018, according to the latest Growth Indicator from the Confederation of British Industry (CBI).
The composite measure, based on 677 respondents across the distribution, manufacturing and service sectors, showed the balance of firms reporting a rise in output at +6%, down from +10% in the three months to May.
The mild slowdown was driven by weaker activity in business and professional services, which, after a spike in May, returned to the fairly subdued rates seen in March and April. Volumes also continued to fall in consumer services, and remained unchanged in distribution. Meanwhile, manufacturing output growth picked up significantly to meet the healthier rates seen towards the end of 2017.
Looking ahead, private sector growth is expected to strengthen a little in the three months to August (+11%), buttressed by a pick-up in distribution and consumer services growth. Manufacturing growth is expected to ease but remain firm.
The CBI’s latest economic forecast highlighted the fact that, despite real pay growth inching into positive territory, living standards will continue to be dogged by weak productivity. As a result, any further pick up in real wages and consumer spending is likely to be modest. Meanwhile, manufacturers should continue to benefit from the lower level of sterling and solid global economic growth.
“Progress in lifting productivity growth at home is urgent”
CBI Chief Economist Rain Newton-Smith commented: “While our latest survey shows that the pace growth slowed slightly in June relative to late Spring, we still expect to see healthier GDP growth in Q2 overall compared with Q1.
“Progress in lifting productivity growth at home is urgent if UK firms are to grasp opportunities overseas. Using proven technologies and sharing best practice are just two examples of how companies can borrow others’ ideas to promote growth.
“Meanwhile flexibility in the UK-EU negotiations will enable both sides to find solutions that protects goods and services trade across Europe, which matters for tens of millions of jobs.”
Retail sales volumes recovered in June
Today’s publication of the latest Growth Indicator follows the release two days ago of the CBI’s Distributive Trades survey for June, which revealed that sales volumes were well above average for the time of year, following three months when they were below seasonal averages. The survey also reported a jump in growth in the volume of orders placed on suppliers.
Retail sales growth was fairly broad-based across retail subsectors, with the pick-up in June driven particularly by a rise in non-store sales, department stores, durable household goods, and “other” normal goods. Grocers and hardware and DIY stores also fared well, reporting robust sales. Meanwhile, carpet and furniture stores and clothing retailers saw a drop in sales volumes in the year to June.
In more positive news for the retail sector, internet sales grew at a faster rate than the long-run average for the first time since January 2018 (although retailers expect growth to ease slightly in the year to July).
Looking ahead, retailers expect growth in sales volumes and orders placed on suppliers to ease in the year to July.
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