Business & Finance, News

Business Confidence Falls to One-Year Low

August 31st, 2017
Author: Economic Voice Staff

Overall business confidence fell 13 points to a one-year low of 17%. Economic optimism fell by 12 points to 5%, the lowest level since June 2016. Confidence in business prospects decreased by 14 points to 29%, lowest level for 3 months. Firms’ intentions to hire stayed positive, edging up by 2 points to 27%.

Chart 1: Economic momentum has softened this year

Lloyds business confidence 1Source: ONS, BDRC Continental, LBCB analytics as of 31 August 2017

Chart 2: Sentiment weaker in consumer services

Lloyds business confidence 2Source: ONS, BDRC Continental, LBCB analytics as of 31 August 2017

Overall business confidence fell 13 points to 17% in August, according to the latest Business Barometer from Lloyds Bank Commercial Banking. This is the lowest level since August 2016.

The share of firms reporting higher business confidence decreased by 7 points to 38% and those reporting lower confidence increased by 6 points to 21%.

Economic optimism fell by 12 points from 17% to 5%, the lowest level since June 2016 and the second lowest level since 2012.  The share of firms citing greater economic optimism fell by 5 points to 33%, while the share reporting lower economic optimism rose by 7 points from 21% to 28%.

The net balance of firms indicating an improvement in their own business prospects decreased by 14 points to 29% in August. Forty-three percent reported stronger business prospects, down 8 points from July, while those reporting weaker prospects rose by 6 points to 14%.

Sentiment in the industrial sector, covering manufacturing and construction, fell to a 3-month low of 10%. Consumer services confidence also dropped to a 14-month low of 3%. In contrast, overall confidence in business and other services rose by 5 points to 29%.

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The net balance of firms expecting to raise their headcount over the coming year remained positive, increasing by 2 points to 27%.  The share of firms expecting to increase their headcount remained the same at 33%, while 6% expect to reduce staffing levels, down by 2 points from last month.

Profit margins remain under pressure, with the net balance unchanged at -8%. The proportion of companies reporting higher margins compared with three months ago rose 5 points to 15%, but this was offset by a 5 point rise in the share citing lower margins to 23%.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, commented:

“The August report shows that overall business confidence has fallen to the lowest level for 12 months, with sentiment weakest among consumer-facing firms. While confidence overall is now just under the long term average, firms’ hiring plans remain robust.”

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