Future holds fear for business
BUSINESSES remain pessimistic on the chances of a sustained economic recovery, despite indicators showing that trading levels are at their strongest since before the financial crisis.
Accountancy firm BDO’s monthly output index remained above 100 the third consecutive month in June – the first time conditions have stabilised at that level since 2007.
The indicator of businesses’ current trading recorded a 0.6 point increase in June to 101.6, prompting BDO to forecast annualised GDP growth of at least 2.5 per cent over the third quarter.
But the firm said its optimism index, which reflects how businesses expect trading to fare in the future, dropped again from 97 in May to 96.9 in June, pointing to weaker growth two quarters ahead and fears over the impact of the coming public spending squeeze.
“Businesses are worried about the future,” said BDO partner Peter Hemington.
“The Comprehensive Spending Review in October will flesh out how the government plans to put its proposed spending cuts into practice and there will be some big bumps on the road to recovery ahead.”
BDO added that expected further rises in inflation and unemployment would do little to improve business anxieties over their economic prospects.