Demand from consumers sags

EVIDENCE of an unexpected buckling in consumer demand and indications that inflation pressures are edging higher emerged in a new survey of business confidence by Dun & Bradstreet, the business information firm.

The quarterly poll of more than 1,500 managing directors in industry and commerce showed confidence in new orders among wholesalers has dropped sharply, while retailers' hopes for future sales have dimmed significantly. Businesses' expectations of rising sales and profits have levelled off and, for the seventh quarter in succession, they say that they plan to raise prices.

Philip Mellor, senior analyst at Dun & Bradstreet, said: 'The most worrying aspects are the long-term inflationary pressures which are developing as companies look to increase prices and staffing levels despite a plateauing out of sales expectations.'

The main finding of the poll was that the balance of optimists over pessimists expecting increased new orders fell 11 points to 45. The biggest slump in confidence over new orders occurred among wholesalers, where the balance tumbled by 17 points to 42, and among construction companies, where the optimism index plummeted 22 points to 19. The optimism index for retailing firms dropped 11 points.

Predictions of increased prices rose two points to 25, the seventh quarter in a row in which prices were expected to increase. Dun & Bradstreet said it indicated that business was passing higher costs on to customers.

The survey shows that confidence is strongest in the North- west and the West Midlands. The most pessimistic regions are Wales and Scotland. It also shows that London no longer leads the recovery. The optimism index for new orders in the capital slid 17 points to 41. Confidence on higher profits fell seven points and optimism on larger sales dropped two points.

There was some cheer in the finding that business still expects to employ more staff. Some 40 per cent of managing directors say they will raise staffing levels in the next three months against 11 per cent who say they will cut jobs.