Confidence falls while activity starts to rebound

Two new surveys published today provide conflicting evidence over the state of the economy, with Lloyds Bank suggesting England at least may be seeing some rebound in business activity, while accountant Deloitte says that confidence among finance directors is now at its lowest level since the recession.

Lloyds' latest purchasing managers' index suggests that while there is little evidence of recovery in employment, business activity picked up in all nine English regions it monitors during September.

The survey is important because it follows a dire report from Lloyds in August when purchasing managers suggested business activity was at its lowest level for two years.

However, John Maltby, group director of Lloyds TSB Commercial, said not to get carried away. "The latest improvements in business activity were weaker than those seen at the start of the year, reflecting a less favourable global economic backdrop and strained business confidence in the wake of the euro area sovereign debt crisis," he said.

Similarly Margaret Ewing, a senior partner at Deloitte, said companies were nervous. "The world has become riskier and more uncertain for corporates," she said. "Chief financial officers are responding with a renewed focus on cost control – expectations of a revival in corporate capital spending and hiring are fading."

Deloitte said optimism among CFOs was at its lowest level since the beginning of 2009, when the UK was still mired in recession. Significantly, 43 per cent of CFOs think the UK will now slide back into recession, up from 33 per cent in the second quarter of the year.

Ian Stewart, chief economist at Deloitte, added: "Finance chiefs have become more bearish on the outlook for profits. Most see profit margins contracting over the next year, a marked change from the optimism we saw in profits a year ago."

The Bank of England's decision last week to launch a second round of quantitative easing underlines how seriously it regards the possibility of a return to recession.

There has been conflicting evidence about the extent of the slowdown from some parts of the economy, with purchasing managers index data giving more optimistic signals than official data on growth.