British business sentiment rises in May and moves back close to the level seen before the Iran war. The improvement contrasts with weaker readings from other recent business and consumer sentiment indicators, including preliminary PMI data.
Highlights
- Lloyds monthly survey shows UK overall business confidence rose 3 points to +47 in May, above the long-run average of +30.
- Construction sector confidence jumps 15 points to +44, retail rises 8 points to +53, while manufacturing drops 4 points to +43.
- Gap emerges as Lloyds survey shows firming sentiment, contrasting with May's preliminary PMI data at its lowest in over a year.
May survey points to firmer trading outlook
Lloyds said in its monthly survey on Friday that overall business confidence rose by 3 points in May to +47, near its 12-month average of +48 and above the long-run average of +30 recorded since the survey began in 2002.Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said businesses are more optimistic about their own trading prospects in May, with two thirds expecting stronger output over the year ahead. Confidence in companies' own trading outlook rises by 4 points to +58, while confidence in the wider economy increases by 2 points to +35.
The survey also says rising inflation and cost pressures, economic uncertainty and weaker customer demand remain the main negative factors for businesses. Lloyds' figures are based on online polling by Ipsos of 1,200 companies with annual sales of at least 250,000 pounds, conducted from April 30 to May 18.
Sector moves diverge from other indicators
Sector readings show the strongest monthly improvement in construction, where confidence jumps 15 points to +44 in May, close to that sector's 12-month average. Retail rises 8 points to +53, services remain unchanged at +45 and manufacturing falls 4 points to +43.The Lloyds survey stands apart from other recent measures of UK sentiment. Previously released preliminary PMI data for UK businesses falls to its lowest level in more than a year in May, highlighting a gap between this survey's firmer mood and broader signs of caution across the economy.
Our earlier coverage of the Fed’s inflation debate examined how a firmer U.S. inflation backdrop—highlighted by April’s elevated PCE readings—was complicating the case for near-term rate cuts. We also outlined how persistent price pressures and shifting component weightings were keeping policymakers cautious, reinforcing a more hawkish tone as markets reassessed the path of interest rates.
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