The CBI’s expected growth indicator – a weighted average of business expectations from its manufacturing, distribution and services surveys – is likely to have recouped part of its July loss in August, based on already-released data. The current level of the indicator is consistent with weak economic expansion.
The expected growth indicator slumped from +16% in June to -3% in July but even the latter was above a level suggesting economic contraction, based on historical evidence. The indicator is estimated to have recovered to about +4% in August, reflecting gains in all three component surveys, with a particularly large rebound in retail / wholesale trade expectations – see chart*.
The historical correlation of the CBI indicator with quarterly GDP / gross value added (GVA) changes is similar to that of the more widely-followed composite PMI output index, the July level of which was consistent with quarterly contraction of 0.4%, according to the index compilers. The CBI indicator suggests that the PMI will recover in August but it may remain below the “breakeven” 50 level, partly because its coverage excludes distribution.
*The CBI indicator values in the chart have been seasonally adjusted. Seasonal influences appear to have contributed to the large fall in the indicator in July.