UK Businesses More Confident, Prices Cool – Lloyds Survey
British businesses were their most confident this month since May 2022 and pricing expectations, which are being watched by the Bank of England as it grapples with high inflation, cooled to a six-month low, a survey showed on Friday.
Increased Business Confidence
The Lloyds (LON:) Bank Business Barometer rose in March by 11 points to 32%, helped by rising optimism about the outlook for the economy.
According to the survey, business confidence has surged this month, with economic optimism and tradingSponsored Product prospects bolstering firms. The report shows hiring intentions are improving, which may result in employment growth picking up in the coming months.
Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease. Senior economist at Lloyds Bank Commercial Banking, Hann-Ju Ho, said that wage expectations had peaked and were showing a slight strengthening in March.
Other Economic Indicators
The S&P Global/CIPS surveys of businesses published last week showed Britain’s private sector expanded in March, although more slowly than in February.
The Bank of England expects Britain’s economy to expand slightly in the second quarter. This represents an upgrade from its forecast in February for a 0.4% drop. However, the bank left its forecast of a 0.1% decline in the first quarter unchanged.
Impact of High Inflation on Pricing Expectations
The Lloyds survey showed that pricing expectations, being watched by the Bank of England as it grapples with high inflation, cooled to a six-month low.
High inflation, which is currently around 3%, has been fuelled by rising energy prices, supply chain problems, and higher wages. The Bank of England previously raised interest rates to curb inflation pressure. However, the positive outlook of the UK’s economy may indicate that further interest rate hikes may not be necessary.
The rise in business confidence and the cooling of pricing expectations indicate a positive outlook for the UK economy. While high inflation remains a concern, the likelihood of further interest rate hikes has reduced. This could result in increased employment growth and further economic expansion in the coming months.