Growth on the up as confidence rises?

Optimism among UK companies about the state of the general economy rebounded sharply in April which indicates that above-average growth economic is likely to be sustained throughout the second quarter of the year, according to the latest Lloyds TSB Corporate Markets Business Barometer.

The balance of firms feeling optimistic rather than pessimistic about the UK economy rose by 12 percentage points during April, up to 41 from 29 in March. This represents a level of confidence more than double the survey's 5-year average of 18.

In addition, when asked about their own business activity, 67% of firms expect to experience a rise in trade, 30% expect activity levels to remain constant and just 2% expect a decline. Overall, this represents an increase in balance from 56 in March to 65 in April.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "This leap in confidence suggests a robust April and the numbers imply that this rate of healthy economic growth will persist."

Williams added that stronger demand growth has allowed firms to increase prices and investment spend is now outstripping consumer spending. The sentiment of firms reported in this month's survey indicates that economic expansion will be sustained at a near 3% pace. "With official estimates of annual GDP growth in Q1 2007 currently at 2.8%, this survey indicates that this pace is on course to be replicated in Q2 as well," he noted.

Elsewhere, the balance of optimism about their own business activity among industrial firms has rocketed from 44% in March to 71% in April. With official data showing net rates of return for manufacturers rising 10% in Q4 2006, compared with 6.9% in Q3, this should also have a positive impact on confidence levels.

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2007-05-01 10:33:58 © Moneyextra.com