Economy resilient heading into 2016 as business optimism picks up

By Anita Jaynes on 9 October, 2015

Businesses expect growth to continue into 2016 as business optimism increased for the first time in over six months, according to the latest Business Trends Report by accountants and business advisers BDO LLP in the South West.

BDO’s Optimism Index increased to 102.2 from 101.9 this month, the first uptick in confidence since February this year. This confidence is underpinned by continuing low inflation rates, which are helping manufacturers in particular. The BDO Inflation Index sits at 96.1 this month, showing that businesses expect input prices to rise slowly.

BDO’s Employment Index still sits at a high level (107.6) this month. Coupled with increasing wages, this suggests the consumer-led recovery is set to continue.

But businesses and policy makers cannot afford to be complacent – the IMF last week warned that the risk of a global recession is still on the horizon. BDO is calling for a boost in government and business investment to protect South West growth against future global economic tremors.

Commenting on the findings, Andrea Bishop, audit partner and head of BDO LLP in the South West, said:  “The economy looks set for continued growth in the coming months, but this should not lead to complacency.

“Policy makers must act to insulate the economy from the increasingly gloomy global economic outlook.  So far our recovery has largely been based on consumer spending, but we need business and public sector investment if we are to rebalance the economy, boost productivity, and make sure that companies thrive in the region. This will put the economy on the firmest possible footing for the potentially shaky coming months.

“Government has a vital part to play – speeding up infrastructure projects would be an important boost. In addition, businesses should make sure that they are getting the best out their workforce by focusing on improving skills to help solve the productivity puzzle.”

Overview of the BDO indices:

An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison.

  September 2015

(figures for this report)

August 2015 July 2015 September 2014

(equivalent report last year)

BDO Optimism Index 102.2 101.9 103.3 105.0
BDO Output Index 104.3 104.5 104.4 103.3
BDO Inflation Index 96.1 95.9 95.2 96.6
BDO Employment Index 107.6 107.9 108.4 112.3

 Pictured above: Andrea Bishop, audit partner and head of BDO LLP in the South West