CBI survey points to a soft landing - Business - News - The Independent

CBI survey points to a soft landing

THERE WAS fresh evidence yesterday that the worst could be over for Britain's manufacturers, after new figures showed the first improvement in business confidence for more than a year.

But Kate Barker, CBI chief economic adviser, argued that a further half- point cut in interest rates was still needed if the economy was to avoid outright recession.

The Governor of the Bank of England warned separately that unemployment would rise in the coming months as the economy slowed.

Giving evidence to a House of Lords committee, Eddie George said the rise would not be dramatic, although it would help ease inflationary pressures.

The recent slowdown in consumer spending was largely attributable to "a shock to confidence," the Governor said, adding that he hoped that interest rate cuts had helped address that problem.

According to the quarterly Confederation of British Industry (CBI) industrial trends survey, business confidence among manufacturers jumped by 18 points between October and January.

Confidence among exporters for the coming year was also markedly less pessimistic, the CBI said.

Yet with 40 per cent of manufacturers still expecting business conditions to deteriorate in the coming months, overall confidence levels remained weak.

"It is too early to say whether manufacturing is bottoming out", Ms Barker said, adding that the survey was completed before the Brazilian devaluation, which sparked another round of jitters in the financial markets.

She predicted the loss of another 41,000 manufacturing jobs in the first quarter of 1999, and expressed concern about falling prices.

"There are strong indications of deflation in the manufacturing sector, with prices expected to fall at the sharpest rate since 1958," she said.

Ms Barker said there was scope for interest rates to fall as low as 5 per cent - one percentage point below current levels - by the spring.

Few City analysts believed the survey would be a barrier to further interest rate cuts at next week's meeting of the Monetary Policy Committee.

Adam Cole at HSBC Securities said: "I think if anything I would have expected a bigger improvement in sentiment, and the survey was a bit disappointing. ".

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