Confidence boost hints that worst of recession now over

CONSUMER confidence has hit an 18-month high and small businesses are at their most optimistic for two and a half years, providing two of the strongest signals yet that the worst of the recession has passed.

The public are feeling more secure about finances and job prospects, according to today's consumer confidence report compiled by British Retail Consortium (BRC) and Nielson.

Confidence had fallen to a record low during April, according to the index, and, although concerns still remain about employment, people are now more positive about spending on discretionary items.

Meanwhile, the CBI said today small and medium-sized enterprises (SMEs) expect their order books to stabilise in the coming quarter, while fewer manufacturers reported declining output than in its previous survey.

But export orders continued to fall despite the weakness of the pound, with demand for goods not yet rising.

The UK economy is expected to emerge from recession during the current quarter after surprise provisional figures last week showed the worst downturn in 60 years continuing into Q3.

Stephen Robertson, the BRC's director general, said: "Our figures suggest it will be a long, slow climb out of recession for many customers, but some do now have their feet on the first rung of the ladder.

"There's no question the general mood of customers is better than a year ago, when conditions were dire, but improvement has been slow so far. Half of consumers believe we'll still be in recession in a year's time."

However, retailers were dealt a fresh blow as figures suggested half of consumers were planning to spend less on gifts this Christmas than last year.

The Execution Spend Trend survey found that 10 per cent of respondents expect to spend "a lot less" than last year, with a further 40 per cent aiming to part with "less" cash than in 2008. On average, consumers expect to spend 358 on presents this year, 4 per cent less than in 2008.

Commenting on the improvement in small business optimism, Professor Russel Griggs, chairman of the CBI's SME council and of the Scottish Government's regulatory review group, said: "

It is disappointing that the export bounce, which medium-sized firms had hoped to see, failed to materialise.

"Accessing finance remains a particular problem for this size of business, with a record proportion saying it is affecting their ability to invest."

Worries over depressed demand also prompted manufacturing body the EEF to call for the Bank of England to extend its quantitative easing programme and pump a further 50 billion into the economy when it meets this week to set interest rates.

Colin Borland, of the Federation of Small Businesses in Scotland, said: "The majority of small businesses are positive about the year ahead. But what will stop any tentative recovery in its tracks is a sustained period of mass unemployment."