Business optimism takes a knock

Indicators of business optimism tumbled across the board, reaching a three-year low, according to the latest survey by Dun & Bradstreet, published today. Confidence about the level of sales profits, employment and new orders dropped everywhere but Wales.

The proportion of businesses expecting a fall in new orders in the third quarter of 1996 climbed to 40.5 per cent, compared with 33.5 per cent in the second quarter. Stocks are not being increased, due to the expectations of sluggish demand, Dunn & Bradstreet will argue.

"The deterioration in optimism for new orders bodes ill for the Chancellor's hopes of GDP growth reaching 2.5 per cent in 1996," Philip Mellor, senior analyst at D&B, said.

But, he added, inflationary pressures were likely to remain low, leaving scope for interest rate cuts aimed at stimulating economic growth.

The survey, based on data from 1,800 directors from around the UK, casts further doubts on the Government's revised economic forecast of 2.5 per cent growth through 1996.

In Wales, optimism for increased profits was markedly more positive than in the rest of the country, with 61 per cent of those surveyed believing profits would be higher in the third quarter. The survey predates the announcement of Lucky Goldstar's investment in Wales last week.

The prospects for employment were less positive, with at least 40 per cent of firms across the country expecting to reduce staff over the third quarter.

Broken down by sector, the survey data showed manufacturers as being more bullish, with those expecting higher profits in the third quarter rising to 50 per cent from about 40 per cent in the second quarter.

The regional picture was mixed, with London and the South-east showing a sharp fall across all sectors, as did the Eastern region. But the East Midlands was somewhat resistant to the trend, with 77 per cent of firms expecting to increase sales over the next quarter.

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