60 percent of the ‘votes’ cast by UK-based IBDs in the BikeBizBarometer are already in and the trend for turnover and confidence is upwards.
However, profits are not rising on the same curve.
And yesterday the Institute of Directors released the results of its Business Opinion Survey for the first quarter of 2002 which showed a slippage in company performance, lower capacity utilisation and weaker profits, despite better output growth over the past three months and a sharp recovery in optimism. However, all the forward indicators improved, especially export orders and expected profits. The IoD attributed some of the improvement to a generally better business climate and part to a recovery from the first instinctive reaction to 11 September events in the final quarter of last year.
The IoD said that business optimism jumped in the first quarter to its best level since the second half of 2000, after slumping in the previous quarter. The balance of companies which were more, rather than less, optimistic about their company’s prospects (relative to the previous quarter) in March was 40 percent which compared with 10 percet in December, a probable reaction to the 11 September terrorist attacks in the US.
Reported profits, however, were the worst since December 1998 as cost increases continued to outstrip price increases, and company performance slipped further even though the majority of respondents reported that their companies were still performing well. The balance of those companies performing well, minus those performing badly, was 67 percent compared with 72 percent in December, 76 percent in September and 80 percent in June. But output growth recovered a little after slipping for much of the previous two years. The balance of directors reporting higher output minus those reporting lower output was percent in March compared with 33 percent in December and 38 percent in September.
Price pressures remained weak, with many more respondents reporting increased costs than increased prices – putting a squeeze on margins. Average settlements were around 4.0 percent in March, down on December’s 4.6percent.
Ruth Lea, Head of the Policy Unit at the Institute of Directors, said:
"Our latest survey, on the whole, suggests that the economy is recovering despite some weaker numbers for company performance. Business optimism has ‘perked up’ after collapsing in December – though we believe that much of December’s slump was a instinctive reaction to events of 11 September so the figures should be interpreted with some caution. Margins throughout the economy are, however, still being squeezed by cost increases outstripping price increases.
"We now expect GDP growth of around 2% this year, with growth coming from both the public and the private sectors, and inflation, on the whole, should remain benign for the rest of the year. But, given buoyant consumers, a hot housing market and assuming a fairly neutral budget, we expect higher interest rates this year. The first hike is likely before the end of June."
And according to the British Retail Consortium, the UK’s retail sales recorded their strongest growth in six years during March.
Like-for-like sales rose by 7.5 percent compared to the previous year, the biggest rise seen since 1996.
A March Easter and vibrant shopping during the holiday weekend helped buoy the numbers, said the BRC.
UK interest rates currently stand at 4 percent, the lowest rate for nearly 40 years.
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