BDO data points to ‘confidence cocktail’
THE latest monthly Business Trends report from accountancy group BDO suggests growing first half confidence.
Its Optimism Index, which tracks how businesses expect orders to develop over the near term, shows confidence rose to a new quarterly high of 104.9 in December, well above the 100 mark indicating the long-term average.
The firm said optimistic businesses are expected to take on more full-time, rather than part-time staff which will boost real wages and household spending power.
Low inflation, falling costs, jobs growth and a rise in real wages are contributing to a “confidence cocktail”, said BDO.
The dramatic drop in oil prices contributed to an eighth consecutive fall in the Inflation Index to 95.4 – a fraction above the 95 level which indicates an overall drop in costs. The Employment Index remained stable at 113.8, which BDO said indicated that businesses were taking on staff at a steady rate, reducing the risk of unemployment.
Partner Tim Entwistle said: “This is a great start to 2015. Optimism has increased, hiring expectations remain strong and inflationary pressures are down. In the short term, the Chancellor couldn’t have hoped for a better way to ring in the New Year. But there are clouds on the economic horizon.
“The Chancellor will be looking to the housing market to support growth. But if average house prices drop by 0.6% in 2015 (as forecast by the Centre for Economics and Business Research last week), consumer confidence could take a knock and spending could quickly be reined in. In these relatively good times, the Government needs to do everything it can to support business growth, encourage long term investment and end underemployment.”
