UK business confidence remained stable in March as companies increased their hopes for interest rate cuts by the Bank of England (BoE) this year.
According to Lloyds (LLOY.L) economic barometer, general confidence remained unchanged at 42% for the third month in a row, indicating continued positive development in the British economy.
Economic optimism reached 39%, its highest level in over two years, while wage growth expectations declined for the second month in a row but were still above the long-term average.
These results appear to be confirmed by official monthly gross domestic product (GDP) data, according to Lloyds, with data for January and February suggesting that the economy began to grow again early this year.
This came after concerns about supply chain disruptions had decreased compared to previous months. This was no longer the factor that was causing the most concern for companies. The main issues were interest rates, inflation and energy prices.
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When asked about their own trading prospects, companies remain optimistic, albeit somewhat less so than in previous months.
More than half (55%) of respondents said they expected stronger production over the next 12 months, while 10% remained unchanged in their expectations of weaker activity. As a result, the net balance of trade prospects fell by four percentage points to 45%.
The most optimistic mood, according to the survey, was in eastern England, Wales and the north-east.
“The barometer results of the past few months show a consistent trend. Companies are increasingly confident about the economy. At the same time, inflation is falling and there are hopes that interest rates will start to fall this year,” said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking.
“There continues to be a mixed picture between regions, with the largest increases in Wales and the South West. The strongest confidence was reported in the East of England, where confidence rose for the third month in a row. Confidence in the North East eased slightly but remained strong in April.
“The second quarter of 2024 has started well for businesses and we are seeing businesses express greater confidence in a sustained economic recovery.”
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Companies in the manufacturing sector reported increased confidence this month, rising 45% (up four points), the highest in three months. Business confidence in the services sector (42%) and construction (41%) also rose, largely due to increased economic optimism.
In retail, confidence fell slightly to 40% after last month’s strong result, showing that confidence in this sector remains fragile. Retail is also more vulnerable to external factors that do not affect other sectors, such as bad weather.
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