Business confidence wobbled by interest rate rises

BUSINESS confidence has been dented as a string of interest rate rises begin to bite, a new survey has shown.

BUSINESS confidence has been dented as a string of interest rate rises begin to bite, a new survey has shown.

The region’s manufacturing and service sectors are feeling the biggest pinch but order books for domestic and export business were good, the quarterly survey of North-East Chamber of Commerce (NECC) members found.

According to the North-East Business Barometer, investment in training has been scaled back – an area identified as a problem for the future growth of the regions’s economy.

Of the 4,100 NECC members surveyed just 4.9% – 199 people – responded.

NECC director of member relations Andrew Sugden said: “Order books remain strong both for manufacturing and service [sectors] but this is at the expense of medium and longer term investment plans.This is worrying when combined with the fall in business confidence because there is a fear that businesses will get the jitters. It indicates an underlying concern of economic slowdown.

“Short term business confidence is at its lowest since the beginning of 2006 at +11% from +21% last quarter.”

Meanwhile UK order balances – the amount of orders coming from customers – only dropped three percentage points to 17% compared to the previous quarter.

Mr Sugden said: “We have all been expecting at some point the interest rises to cause a slow down and this is starting to happen.

“But although there has been a general cooling across the board, manufacturing has held up quite well particularly when you take into account the three interest rate rises this year.”

After the sharp drop in growth for the manufacturing sector in the first quarter of 2007, the sector appears to be recovering and moving closer to the higher balances experienced by the services and all sectors.

Mr Sugden said: “Overall the context is that the UK economy has been incredibly benign experiencing low interest rates, low inflation and high employment for several years.

“What we really have is nothing more than a wobble.”

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