UK economy sees modest growth over summer

UK private sector activity rose modestly again in the three months to August, according to a study.

The latest CBI Growth Indicator reveals that output growth across the manufacturing, distribution and service sectors rose steadily (+8 per cent), at a broadly similar pace to the previous month (+5 per cent).

Growth continued at a decent, if slower, pace in manufacturing, while volumes grew at a more moderate pace in consumer services and held steady among business and professional services firms. Meanwhile, sales stabilised in the retail sector after four months of decline.

The survey of 833 respondents shows that, over the next three months, firms expect private sector growth to see a similarly steady rise (+7 per cent); an improvement on July’s expectations.

An economy in a growth phase

CBI chief economist Rain Newton-Smith says that, while it’s still early days following the EU vote, the economy is continuing to grow at a steady pace, despite mixed performances across the different sectors.

‘Exporters are seeing some competitiveness benefits from the fall in Sterling and low interest rates are helping to fuel some consumer-focussed parts of the economy. But the flip side of the weaker pound is higher import prices, which will put upward pressure on inflation and erode household spending power going forward,’ she adds.

Business optimism and investment plans have deteriorated in the wake of Brexit so as the summer draws to a close, firms want the government to communicate its plans for negotiations to leave the EU, Newton-Smith continues.

‘At the same time they want to see a robust Autumn Statement to set the economy on the right path to deliver growth and prosperity. And the government must grasp the nettle on important decisions like aviation capacity and Hinkley Point.’

Further reading on business outlook

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