Confidence points to improved economy

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Business confidence has rebounded by the strongest margin since May 2009, according to the latest Lloyds Bank Corporate Markets Business Barometer. However while there's confidence in manufacturing, sentiment in retailing has slumped.

More than half of businesses – 54 per cent – said that they were more optimistic about economic prospects than three months ago. In March the figure was just 45 per cent. Meanwhile, 24 per cent of businesses said they were less optimistic, down from 44 per cent in March.

The balance rose 29 points to +30 per cent in April, up from a two-year low of +1 per cent in March.

The retail and distribution sector has seen optimism decline over the past year from +49 per cent to +6 per cent in April. This reflects the impact of weak real income growth, higher propensity to save and the fear of tax rises.

In contrast, confidence is improving in the manufacturing sector, rising nine points to +28 per cent, buoyed by the sustained fall in the pound since the financial crisis.

Public spending cuts are likely to negatively affect businesses more in the North than the South, but this is partly offset by stronger business prospects for the manufacturing sector which accounts for a higher share of output in the North.

Trevor Williams, chief economist at Lloyds Bank Corporate Markets, said: "It is far too soon to say that this is a new upward trend, but if sustained, it would point to an improvement in the economy in the second half of the year."