A bit of good news for new Bank of England governor Mark Carney as he wedges himself onto the Central Line for his second day on the job: new research by the British Chambers of Commerce suggests business confidence is at its highest level since 2007.
The BCC’s quarterly economic survey shows the economy is likely to have grown by 0.6% during the second quarter of 2013: pretty good, considering the organisation’s previous forecast suggested it would be more like 0.9% over the whole year.
The rise in confidence is partly driven by export sales, which during the second quarter of this year hit their highest level since the survey began in 1989, while orders rose to their highest level since 1994.
Employment balances also rose following a decline in the previous quarter. With +19% of manufacturing companies creating new jobs (anything over 0 is more companies creating jobs than making redundancies), up from +11% in the first quarter. In the services sector, it rose from +6% to +15%.
Not everything is rosy, though: although the balance of manufacturing firms looking to increase the amount they’re investing in plant and machinery rose to +23%, in the service sector it fell by two points (though admittedly it was still positive) to +7%.
And although businesses are feeling positive, that doesn’t seem to be translating to their balance sheets: cashflow balances in both sectors are weak, increasing by just two points to +4% in manufacturing, and falling by five points to +1% in the services sector.
This comes less than a week after figures from the Office for National Statistics suggested that we didn’t, after all, go into a double-dip recession last year, which would have been very encouraging, had the ONS not also pointed out GDP has fallen by 7.2% against its peak in 2008. So any suggestion the economy will improve more than expected this year will come as a relief to the Bank of England, Treasury et al.
David Kern, chief economist at the BCC, is nevertheless cautious.
‘Serious risks remain at home and abroad,’ he said in this morning’s statement.
‘Domestic inflation has increased again, and this risks worsening the squeeze on businesses and consumers.
‘To support UK firms, the [Bank of England’s] Monetary Policy Committee must avoid steps such as adding to QE, which could trigger a further rise in inflation. At the same time, the MPC should also strive to keep interest rates low to encourage businesses to invest. The government should also play a role by giving greater support to exporters, and providing access to finance for dynamic, viable businesses.’
Crikey. Demanding, much?