UK private sector growth hits new high, but CBI warns of storm on horizon
Private sector growth has hit a one-year high thanks to a pick-up in manufacturing activity, but the Confederation of British Industry (CBI) today warned of a "significant" slowdown in the year ahead.
The CBI's latest growth indicators' survey showed output across the manufacturing, distribution and service sectors rose to a balance of 17% in the three months to December, the highest level since the same month last year, when it reached 20%.
Manufacturing saw the strongest growth rate, while the retail sector experienced a slower pace of growth despite a "solid" rise in sales. Volumes also picked up in business, professional and consumer services.
The survey, which polled 788 business representatives, found that firms expected similar momentum over the next three months, with a balance of 15% seeing healthy growth over the first quarter of 2017.
But the CBI cautioned that the long-term picture was not as bright. It said industry surveys have shown that inflationary pressures are building, while official data is pointing to rising cost pressures as the weak pound drives up import prices.
Sterling has fallen more than 18% against the dollar and more than 9% against the euro since the Brexit vote.
"Although growth since the EU referendum has been stronger than expected, we anticipate a significant slowing further ahead," the report said.
Manufacturers' expectations for output price inflation are at their highest since mid-2011, and the CBI said that consumer services and distributive sector firms were already expecting a slowdown in growth over the next few months.
CBI principal economist Alpesh Paleja added: "It's great to see the economy end the year on the up, with growth strengthening across the private sector.
"However, economic growth is likely to soften next year, as heightened uncertainty hits business investment and higher inflation weighs on household spending.
"With the fresh slate of a new year on the horizon, British businesses will be looking to the Government for as much clarity as possible on upcoming EU negotiations, and want to work together to develop a post-Brexit economy that sustains growth and prosperity for all."
The CBI's findings came after the Office for National Statistics (ONS) revealed that the Government borrowed a higher-than-expected £12.6bn during November, in the first update on the UK's public finances since the Autumn Statement.
The ONS said public sector net borrowing, excluding state-owned banks, fell by some £0.6bn compared with the same month last year.
Economists were pencilling in a figure of £11.6bn.
The ONS statistics came after Government borrowing, excluding banks, for the financial year to date - April to November - fell by £7.7bn to £59.5bn, compared with the same eight months last year.
A spokesman for the Treasury said: "The Government has made significant progress in bringing the public finances under control, but our debt and deficit remain too high.
"That is why the Chancellor set out new fiscal rules to return the budget to balance, while creating the space to support the economy and raise productivity."