Easing Omicron fears and supply chain disruption boost business outlook
Easing Omicron fears and supply chain disruption boost business outlook
- BDO’s Output Index hits seven-month high as consumer confidence rebounds
- Improvements in manufacturing output and optimism indicate first signs of supply side challenges easing
- Employment Index reaches its highest point since March 2020
Receding fears about the Omicron variant and growing supply chain resilience caused business output and optimism to rise in January, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.
The BDO Output Index jumped by 7.84 points to a seven-month high of 117.52 following an increase in consumer activity as fears regarding the new variant subsided. The figures for January mark a turnaround from December, when concerns over the new variant helped drag the Output Index down by 3.31 points.
Businesses also appear confident that the long-term threat of coronavirus is decreasing. BDO’s Optimism Index increased to 104.91 in January, its highest value since July 2021, and 1.10 points above December’s cautious outlook. The index now sits well above the 95 level which marks positive trend growth.
The BDO Manufacturing Output and Optimism indices witnessed a marked improvement, rising by 2.83 and 2.96 points respectively. This has been driven by an initial easing of supply-side issues, as well as an improved outlook for coronavirus.
An uptick in output and outlook also pushed BDO’s Employment Index to its highest point since the onset of the pandemic in March 2020. The index rose 0.9 points in January to 109.98.
Commenting on the results, Kaley Crossthwaite, Partner at BDO LLP, said:
“Alleviating restrictions and reduced fears around omicron have provided a helping hand to businesses at the start of the year. It’s reassuring to see the continued growth in employment mirroring the economic recovery and supply chain problems beginning to subside.
“However, businesses aren’t yet out of the woods. Supply side disruption is expected to continue into 2022 and, when combined with increasing inflationary pressures and rising consumer prices, could place a strain on the outlook for the months ahead.”
ENDS
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. 100 = average value. Above 95 = positive.
|
|
January 2022 (Figures for this report) |
December 2021 |
November 2021 |
January 2021 |
|
BDO Output Index |
117.52 |
109.68 |
112.99 |
76.43 |
|
BDO Optimism Index |
104.91 |
103.81 |
104.27 |
86.34 |
|
BDO Inflation Index |
106.75 |
108.52 |
108.93 |
93.66 |
|
BDO Employment Index |
109.98 |
109.08 |
108.09 |
104.68 |
Note to editors
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Methodological Notes
The BDO Monthly Business Trends Indices are prepared on behalf of BDO LLP by the Centre for Economics and Business Research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.
The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. It incorporates the results of the quarterly CBI Industrial Trends Survey (and the CBI Monthly Trends Enquiry which is carried out in the intervening months); the Bank of England Agents’ summary of business conditions; and the Markit/CIPS Manufacturing and Services PMI data
Taken together the surveys cover over 4,000 different respondents from companies employing approximately five million employees. The respondents cover a range of different industries and a range of different business functions. Together they make up the most representative measure of business trends available.
The surveys are weighted together by a three-stage process. First, the results of each individual survey are correlated against the relevant economic cycles for manufacturing and services. This determines the extent of the correlations between each set of survey results and the relevant timing relationships. Then the surveys are weighted together based on their scaling, on the extent of these correlations and the timing of their relationships with the relevant reference cycles.
Finally, the weighted total is scaled into an index with 100 as the mean, the average of the past two cyclical peaks as 110 and the average of the past two cyclical troughs as 90.
The results can not only be used as indicators of turning points in the economy but also, because of their method of construction, be seen as leading indicators of the rates of inflation and growth.
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bdo@headlandconsultancy.com
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