PoundSterlingLIVE - "New year, new cheer" is the finding of Lloyds (LON:LLOY) Bank, whose Business Barometer survey reports confidence amongst UK businesses has hit a two-year high.
In the strongest start to a new year since 2016, the overall business confidence index rose to 44%, up 9 points on the previous month, offsetting the cautious end to 2023 after December’s 7-point fall.
According to Lloyds Bank, the confidence boost is largely driven by declines in inflation over the past year and lower interest rate expectations.
Businesses are also more optimistic about the economy, with 57% of firms (up from 50%) reporting greater economic optimism compared with 20% (down from 23%) more pessimistic about the economy.
The Bank of England is anticipated to cut interest rates as soon as May, according to money market pricing.
But the Bank of England will note the Business Barometer's findings that hiring intentions have firmed, suggesting the labour market will remain tight and capable of generating domestic inflation above the Bank's 2.0% target.
Businesses reported solid hiring intentions for the year ahead as they continued to prioritise attracting and maintaining staff, reports Lloyds Bank.
The net balance of businesses expecting to increase headcount increased by 4 points to 33%, offsetting most of December’s 6-point fall. The result was higher than all the months of 2023 except for November.
But, the report also reveals expectations for elevated pay settlements have retreated from recent highs, suggesting wage-lead inflationary pressures might be cooling.
In fact, the share anticipating average growth of 4% or more in the next 12 months was at a 5-month low.
Furthermore, price expectations eased for a second month in a row, the first back-to-back decline since June 2022.
The net balance of firms reporting higher prices for their goods or services in the next 12 months fell 3 points to 56%.
Consumer confidence also rose to a two-year high in January, with optimism for the coming 12 months strengthening amidst improved personal finances.
GfK's long-running consumer confidence survey read at -19, the highest level since January 2022.
"Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero. This is exciting as it ends 24 consecutive months of negative scores," says Joe Staton, Client Strategy Director GfK.
An original version of this article can be viewed at Pound Sterling Live
