British Chambers Of Commerce Economic Survey Pointing To Recession?

The second quarter British Chambers of Commerce (BBC) Quarterly Economic Survey presents a grim picture. Appraisals of domestic sales and orders and cash flow by both manufacturers and service providers show that pessimists now outweigh optimists. As shown in the first chart the percent balance for domestic sales by manufacturers fell to -5% from 8% in the first quarter while that of service providers fell, even more, to -7% from 14% in the first quarter. These balances are still above the balances reached in the last recession

The changes in the appraisal of cash flow in manufacturing and the services are even more dramatic than those in sales as shown in the second chart. Data in this series do not extend back through the recession of the early nineties, but the current balances are the lowest ever recorded. Fewer businessmen are planning to expand plant and equipment and to hire additional employees. The percent balance of confidence in profitability over the next twelve months is now close to levels seen in the last recession as shown in the third chart.

The one bright spot in the survey is the manufacturer's appraisal of export sales and orders. The excess of optimists over pessimists regarding export sales increased 12 percentage points to 28% in the second quarter from 16% in the first quarter. The excess of optimists over pessimists regarding export orders increased 6 percentage points to 22% from 16% in the first quarter.

On balance, however, the survey results are hardly reassuring. David Kern, Economic Adviser to the BBC commented: "The Q2 results signal a menacing deterioration in UK prospects. We are now facing serious risks of recession."