Business confidence plummets in June amid rising inflation and political uncertainty.
Cost challenges – including higher energy and staffing costs – remain a drag on activity as does an outlook of subdued demand this year. But there is reason to hope that the pessimism might be short-lived.
The IoD’s Economic Confidence Index
The recovery in business confidence that started to take hold after Liz Truss’ ill-fated mini-Budget last autumn came to a shuddering halt in June. As sticky inflation and soaring interest rates eat away at the economy, a new survey from bosses’ lobby group the IoD shows that directors’ optimism is plummeting.
The IoD’s Economic Confidence Index fell to minus 31 in June, down from minus 6 in May and its lowest level since December. It was the sharpest drop since Russia’s invasion of Ukraine sent energy prices soaring.
The IoD’s report also highlights the growing concern among business leaders that sticky prices could derail the economy by stifling consumer demand and undermining growth. Of those IoD members who were pessimistic about the outlook, 33% cited inflation while 19% blamed falling customer demand. A further 12% pointed to a lack of investment opportunities. However, the IoD’s survey does show a slight improvement in the confidence of directors about the prospects for their own businesses.
The NZIER’s Business Optimism Index
New Zealand businesses are increasingly pessimistic about the economy and the outlook for their own trading activity. The NZIER’s Quarterly Survey of Business Opinion (QSBO) found a net 73% expect economic conditions to deteriorate over the next quarter.
It’s a gloomy picture across all sectors, although building firms appear to be particularly pessimistic.
Retailers are also pessimistic about the economy, likely reflecting their exposure to the 1 April hike in the minimum wage and a weakening in consumer demand. They are also facing rising costs, including those related to wages and higher living costs, which will be a drag on their profitability. NZIER is predicting that retailers will cut their hiring plans and trim back their investment spending in response to these challenges.
The NFIB’s Small Business Optimism Index
The National Federation of Independent Businesses collects data from its membership base on a monthly basis, and the NFIB’s Small Business Optimism Index provides insights into how the country’s 33 million small and independent business owners feel about the state of the economy. It’s an important release each month as small businesses tend to react to economic trends quicker than large firms and are responsible for a significant portion of US job creation.
This month’s index came in at 89.4, a marginal improvement over April’s figure and still well below the survey’s long-term average. That said, the sub-components that mattered most to small businesses – such as job hiring plans and capital spending intentions – all showed gains. The only blemish was the share of respondents who expected better business conditions in six months and real sales gains, both of which declined. Nevertheless, these declines weren’t enough to dent overall optimism.
The Transatlantic Confidence Index
BritishAmerican Business and Bain & Company today released their Transatlantic Confidence Index survey. This report examines the UK’s economic and trade corridor with the US and identifies top recommendations for companies on both sides of the Atlantic.
The 2023 edition of the Index finds that US company confidence in the UK dropped markedly, with three quarters of respondents citing Brexit as one of their biggest concerns. US firms also expressed a renewed concern about the UK’s political stability and their anxiety over economic growth prospects and corporate tax.
Consumer confidence remained robust in June. The Present Situation Index (which measures consumers’ assessment of current economic conditions) rose to a record high of 109.7, while the Expectations Index (which measures consumers’ expectations about future economic and job market conditions) ticked up to 79.1. The uptick in expectations may reflect that consumers are expecting prices to continue falling needs read more hear.
