UK private sector growth resilient against supply chain pressures

According to the latest growth indicator from the Confederation of British Industry, private sector activity rose 32% in the quarter to November, up from 29% previously. Photo: Tolga Akmen/AFP via Getty

Private sector activity in the UK grew at a strong pace in the three months to November, shrugging off concerns around the ongoing supply chain disruption.

According to the latest growth indicator from the Confederation of British Industry (CBI), private sector activity rose 32% in the quarter to November, up from 29% previously. This meant that activity has now been growing at an above average pace for seven consecutive surveys.

The composite measure was based on responses to CBI surveys from 551 firms between 26 October and 16 November.

The research showed that growth remained broad-based and above average across all subsectors.

Growth accelerated in consumer services, climbing to 28% from 24%, and business and professional services rose from 34% to 40%, with the latter seeing the fastest rise in activity seen since May.

Distribution volumes and manufacturing output also grew at broadly similar rates to the previous month, the CBI said.

Read more: UK consumer credit surges to £700m in October

Looking ahead however, although growth in private sector activity is expected to continue at a firm pace, it is expected to ease in the coming quarter. This takes business expectations for growth to their lowest since March, but this still remains above the long-run average.

A combination of strong global demand for goods, as well as ongoing supply chain disruptions are putting an upward pressure on prices. Manufacturers are expecting to increase prices by 2.8% in the next quarter alone, which is a survey record.

“Given challenges across supply chains and rising cost pressures, the resilience shown by the private sector across the past seven months has been encouraging,” Alpesh Paleja, CBI lead economist, said.

Read more: European markets fall as Moderna boss says vaccine less effective against Omicron

“Our surveys were conducted before concern over the Omicron variant grew, so any impact on activity and confidence will need to be watched closely. Some turbulence had been expected anyway in the three months to December, with consumer services diverging from other sectors.

“Looking further ahead, we should build on the economy’s resilience as we head into next year and focus on delivering the high wage, high skill, high growth economy we all want for the country.”

It came as optimism continued to improve in the UK service sector in the three months to November, despite costs growing at the fastest pace since records began.

Earlier this week, the CBI revealed that sentiment for business and professional, and consumer services companies got better in the quarter, however this was a slower pace than the preceding three months.

Watch: What is inflation and why is it important?

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