Rise in economic confidence suggests sustained UK growth
30 April 2007
Optimism among UK companies about the state of the general economy rebounded sharply in April which indicates that above-average growth economic is likely to be sustained throughout the second quarter of the year, according to the latest Lloyds TSB Corporate Markets Business Barometer.
The balance of firms feeling optimistic rather than pessimistic about the UK economy rose by 12 percentage points during April, up to +41 from +29 in March. This represents a level of confidence more than double the survey’s five-year average of +18.
In addition, when asked about their own business activity, 67 per cent of firms expect to experience a rise in trade, 30 per cent expect activity levels to remain constant and just two per cent expect a decline. Overall, this represents an increase in balance from +56 in March to +65 in April.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “This leap in confidence suggests a robust April and the numbers imply that this rate of healthy economic growth will persist.”
Williams continued: “Stronger demand growth has allowed firms to increase prices and investment spend is now outstripping consumer spending. The sentiment of firms reported in this month’s survey indicates that economic expansion will be sustained at near three per cent pace. With official estimates of annual GDP growth in Q1 2007 currently at 2.8 per cent, this survey indicates that this pace is on course to be replicated in Q2 as well.”
The balance of optimism about their own business activity among industrial firms has rocketed from 44 per cent in March to 71 per cent in April. With official data showing that net rates of return for manufacturers rising 10 per cent in Q4 2006, compared with 6.9 per cent in Q3, this should also have a positive impact on confidence levels.
Trevor Williams continued: “Confidence among industrial companies also soared. It seems that despite weakness in industrial output levels, firms have been able to raise prices leading to the strongest level of profits in 18 months. With the stock market flourishing, corporate profitability is vigorous and confidence has surged. Encouragingly, this picture looks set to continue.”
