Recession risk on low morale
BUSINESSES are slashing investment, slowing hiring and freezing pay thanks to worries over the economic outlook, according to the Institute of Chartered Accountants in England and Wales’s (ICAEW) business confidence monitor, published today.
Sentiment among small manufacturers declined for the third quarter running according to the Confederation of British Industry (CBI).
However, services output expanded in January, Markit’s purchasing managers’ index (PMI) showed on Friday, and retail sales last month were better than expected according to today’s BDO’s high street sales tracker.
The ICAEW confidence index stabilised at minus 9.3 for the first quarter of 2012, from minus 9.7 in the previous quarter which saw the first negative reading since mid-2009. The weak data point to a 0.2 per cent decline in GDP this quarter, the Institute believes – taking the UK into recession.
The subdued outlook means average salary growth is set to slow to 1.1 per cent. Unemployment is set to keep rising with small firms expect to increase headcount by 1.8 per cent and larger firms by just 0.5 per cent.
Meanwhile small manufacturers’ output was flat over the three months to January, the CBI reported, with 33 per cent fearing export orders will be hit by the Eurozone crisis.
However, mid-market retailers reported modest sales growth of 0.2 per cent year on year in January the BDO said. The services sector rebounded, Markit reported on Friday, registering strong growth in employment.