Supply chain recovery feeds optimism among companies

Leading chip manufacturers have said that they are prepared for any immediate disruption caused by the Russia-Ukraine conflict to the supply of materials used to make the microprocessors that power cars, smartphones and computers.

Businesses were boosted last month by the lowest inflation rate in a year, helping sentiment to recover from the record lows recorded in 2022.

The latest business trends survey from BDO, the professional services group, reported another monthly jump in output, helped by falling energy prices and a recovery in global supply chains that reduced cost pressures and delays for companies.

The inflation rate is expected to drop sharply from March as the surge in energy prices caused by the war in Ukraine falls out of the yearly inflation basket. BDO’s inflation index, which measures cost prices experienced by companies, fell to a reading of 110.1 in March, a drop from 113.2 in February and the weakest since March 2022.

Measures of business output and employment also nudged up last month, continuing a run of optimistic surveys from companies and consumers. The BDO data is based on a “poll of polls”, analysing business surveys for an overall picture of economic trends. It summarises responses from more than 4,000 businesses in all sectors.

The economy has performed better than expected since late last year, with official growth figures getting a surprise boost at the end of 2022 to ensure Britain avoided a technical recession.

Kaley Crossthwaite, partner at BDO, said the surveys pointed to a growth boost in the coming months, driven by companies taking on workers and having new pipelines of work.

Official growth figures for February are expected to show a 0.1 per cent rise in monthly gross domestic product, a slowdown from 0.3 per cent at the start of the year, according to economists’ forecasts. That should prevent the economy from having suffered a contraction in the first quarter. Growth was 0.1 per cent in the final quarter of 2022.