New year, new cheer: Business confidence at its highest in January for nearly a decade!
‘The strongest start to a new year since 2016’ reports Lloyds Bank’s monthly business confidence index with businesses beginning 2024 in upbeat fashion. Interest rate cuts and lower inflation has meant the figure has risen nine points to 44%, from 35% in December. It is also the best reading since February 2022, the month in which Russia invaded Ukraine which sent a rippling effect across the European economy.
The widespread anticipation of interest rate cuts is the defining factor behind confidence growing amongst businesses. Having being held at a 15-year record high, 5.25% for a fourth time, businesses can expect cuts across 2024. Inflation is also expected to continue to fall in the first quarter, with several economists projecting the rate will be back to its targeted 2% by April from its present level of 4%.
Freer financial circumstances alongside fewer price pressures should put more money in people’s pockets and drive consumer spending, which, in real terms, has been constrained for a year. Wages are also predicted to rise faster than prices, helping ease the constraints of the cost of living crisis on households.
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “Half of all companies say they’re planning to increase headcount in the coming year.” With Lloyds’ research finding that 1/3 of companies planning to expand their workforces over the next year.
However, he added that It is also important to be cautious “with ongoing geopolitical issues and a general election on the horizon” which could intensify quite quickly. The US and GB have carried out missile strikes across the Middle East and Yemen on Houthi targets who claim they are disrupting trade to Israel and its allies following Israel’s bombardment of Gaza.
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