Business confidence dropsbut economic confidence remains stable

31 May 2017

Lloyds Bank’s Business Barometer for May 2017 shows:

  • Confidence in business prospects dropped 34 points to 26%, possibly a temporary fall
  • Economic optimism fell more moderately by six points to 28%, remaining above long-term average
  • Overall business confidence fell by 20 points to 27%, following a seventeen-month high in April
  • Firms’ intention to hire reduced by 18 points to 19%

Overall business confidence fell by 20 points to 27% in May, after a seventeen-month high of 47% last month, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

The decline was led by a drop in the net balance of firms indicating an improvement in their own business prospects, which fell by 34 points to 26% from 60% in May. Despite this, current business prospects are only slightly below the 32% long-term average.

Thirty-nine percent reported stronger business prospects, down 22 points from 61%, while 13% reported weaker prospects, up from 1%.

Economic optimism fell more moderately, by six points to 28% from 34% last month. It remains above the long-term average of 20% and in line with the average of recent months. Just under half of firms (49%, down from 51%) were more optimistic about the economy, while 21% (up from 17%) were more pessimistic.

Consumer services confidence fell six points to 45%, while business services confidence declined 12 points to 28%. Sentiment in the industrial sector dropped by 50 points to 6% despite US and Eurozone business confidence remaining strong.

The net balance of firms expecting to raise their headcount over the coming year remained positive, but fell by 18 points to19%. The share of firms expecting to increase their headcount decreased by 16 points to 23%, while 4% expect to reduce staffing levels, up by 2 points from last month.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, commented:
“Although we have seen a drop in overall business confidence from last month’s elevated level, it is only slightly below the long-term average. The June survey will provide a more complete picture for the quarter, but the results from our survey so far this quarter still point to a pickup in growth after the 0.2% outturn in Q1.”