The report is one of many the bank compile through their agents and this one is the Agents summary of business conditions. It’s based on the views of around 700 businesses so it’s fairly substantial.

  • Recovery in demand and output growth strengthened a little further
  • Early feedback on forward guidance had been broadly positive, number of respondents indicating an increase in confidence that rates would stay low
  • Annual growth in consumer spending has increased both from good weather and underlying rise in consumer confidence
  • Investment intentions had edged higher but modest growth in capital spending overall
  • Manufacturing had edged up a little in domestic and export markets
  • Business services turnover growth picked up due to increased activity in professional and financial services
  • Construction output had continued to strengthen as house-building activity rose
  • Corporate credit availability had been little changed
  • Employment intentions pointed to a slight increase in staffing over the coming six months
  • Capacity utilisation was expected to increase slightly in coming months, though a margin of spare capacity remained
  • The annual rate of growth in labour costs per employee had been broadly unchanged
  • Annual growth in materials costs had remained subdued and moderate inflation in imported finished goods prices had continued, inflation in manufacturers’ output prices and business services prices remained muted
  • Consumer price inflation had remained moderate

That summary uses “edged” and “a little” quite a few times which suggests that businesses are still cautious about the recovery.

Further into the report, the all important employment segment shows that there is no great rush for companies to increase hiring and that they are likely to let existing employees take up the extra productivity and will be waiting for “spare labour capacity to be more fully utilised” before increasing employment. That’s not going to be good news for His Royal Carneyness.

That’s one of the side effects of austerity folks. Companies and businesses have been forced to cut costs and a big chunk of that has been in letting people go. While companies are now leaner and (hopefully) better able to cope with any shocks they are not willing to open the cheque books to much and so that will keep a dampener on employment.

There’s still a long way to go and businesses know that, but they won’t increase spending until they feel a recovery is fully fledged. The problems is though, they are part of the recovery so unless they do pick up spending they could be the cause of the recovery stalling or flattening out. While the data has been good recently maybe we should expect that reaction sometime soon.

The full report can be found here;

BOE Business report 18 09 2013