Market Intelligence Report
CLA / Smiths Gore Rural Economy Index Q2 | 2013
Key points
· Rural businesses are more optimistic than in the first three months of the year, especially non-agricultural businesses.
· Agricultural businesses continue to expect sales and profits to be lower in the next 12 months but the sector is less negative than it was in Q1. Although the optimism of 2012 has gone, profit, investment and employment expectations for the year ahead are broadly neutral. Seven of the eight indicators rose compared with 1Q2013.
· Non-agricultural businesses have bounced back from a negative first quarter. After slight rises in sales over the past six months, they expect higher sales and orders and profits in the next year; expected investment is higher and they expect to employ more people. Seven of our eight indicators rose. This points to recovery but we will be more certain after seeing the results for the third quarter.
Key points have been ‘traffic light’ coloured, with falling indicators coloured red, stable amber and rising green
Market Intelligence Report
About the Rural Economy Index
The Country Land and Business Association and Smiths Gore have developed the Rural Economy Index (REI) to provide a quarterly insight into the business environment of the rural economy.
A sample of agricultural and non-businesses from all regions in England and Wales are surveyed. The non-agricultural businesses include:
Mining, quarrying, renewable energy or waste management / Hotels, accommodation, restaurants or food service / Public sector administration, education or healthManufacturing / Transport, storage or communications / Other services (sports, arts, entertainment, recreation)
Construction / Financial services or property / Other
Agricultural and non-agricultural businesses are analysed separately as the sectors have different drivers. The businesses were asked questions about…
...your actual sales over the past 6 months
...business enquiries over the past 6 months
...your profitability over the next 12 months
...your optimism for your business over the next 12 months
...your expected sales in the next 12 months
...your expected order book in the next 12 months
...your expected investment in the business in next 12 months
...expected employment in the business in next 12 months
Interpreting net balances
As well as showing percentages of businesses reporting higher or lower sales, the REI uses net balances to show the direction and scale of change in indicators. Net balance shows the proportion of businesses reporting a rise in actual sales (or optimism or investment etc) minus those reporting a fall. For example, +26% of agricultural businesses reported higher sales and -21% lower, so the net balance is +5%. This can then be compared with previous quarters.
Actual business performance over the last 6 months
Actual sales were at about the same level for both farming (net balance up to 0% from -5%) and non-farming businesses (net balance up to +2% from -9%) compared with the previous quarter. So the slide in sales seen in Q1 has stopped; 40% of businesses report sales at about the same level as before and around 30% are reporting higher sales.
Enquiries have risen for farming over the past six months (net balance up to +2% from -5%) and they rose sharply for non-farming businesses (net balance rising to +18% from -16%).
Key points have been ‘traffic light’ coloured, with falling indicators coloured red, stable amber and rising green
Market Intelligence Report
The level of business confidence over the next 12 months
The perception of confidence or optimism is a good indicator of the short-term outlook for businesses.
The farming sector continues to be concerned about the future although less so than in Q1, with a net balance of +4% from -14% in both Q1 and 2012Q3.
The non-farming businesses has rebounded significantly from the large drop in confidence in Q1, and is now back to its 2012Q3 level, at a net balance of +41% from +9% in Q1.
Projected business performance over the next 12 months
The Index also looks forward at how businesses are expecting to perform. The significant difference in the expectations of the agricultural and non-agricultural sectors continues. Agricultural businesses continue to expect sales to be lower in the next 12 months, as the net balance remains negative (-4% from -12%). The greater optimism expressed by the non-agricultural businesses is reflected in expectations of higher sales, although by fewer businesses (+25% from +16% in Q1).
These trends follow through into expected order books. Farming businesses now expect orders to be about the same level in the next 12 months (net balance up to 0% from -13%). And more non-agricultural businesses expect growing order books (net balance up to +33% from +10% in Q1).
Future Trends – Profitability, investment and employment
Profitability
The balance of agricultural businesses continue to expect profitability to be lower in the next 12 months, but this has rebounded from the very negative view in Q1 (net balance rising to -4% from -28%). Non-agricultural businesses continue to expect higher profits, although the net balance has fallen to +5% from +9%.
Investment
Farming businesses continue to put investment decisions on hold as the net balance remains broadly neutral, at -4% from -3%. The investment expectations of non-agricultural businesses continue to rise and are now at their highest for over a year (net balance is up to +27% from +9%).
Employment
There are weak signs of optimism in terms of employment as both farming and non-farming businesses expect to employ more people in the next 12 months (farming net balance up to +2% from -5% in Q1, and non-agricultural net balance up to +11% from +2%).
Taking part in the Index
Any business located in a rural area can take part. It takes less than 2 minutes at your computer and costs nothing; in return, you will be sent and can use the results to support your business or sector. We only ask that the results are referred to as the CLA/ Smiths Gore Rural Economy Index. So make a cup of tea, click on XXX and take part!
Key points have been ‘traffic light’ coloured, with falling indicators coloured red, stable amber and rising green