While this was the second successive quarter that optimism in consumer services had fallen, it was the first time in the survey’s history that confidence had fallen in the business and professional services sector, which includes accountancy.
The survey found business volumes and employment have continued to rise in the consumer services industry, while the volume and value of business generated was above normal. Similar results occurred in the business services sector.
However growth in both sectors was expected to slow over the next three months. CBI associate director of Economic Analysis Sudhir Junankar said the drop in optimism was an important signal of ‘short-term expectations of less buoyant growth in business volumes and a fairly downbeat assessment of expansion prospects during 2001’.
Junankar added that the sharper rise in costs coupled with expectations of falling prices was likely to hold back growth in profits.
Growth in business and professional services is expected to be modest over the next quarter, and lower than consumer services, which is expected to record significantly higher profitability than its counterpart.
Roger Bootle, an economic advisor to Deloitte & Touche, said the result of the survey were the ammunition the MPC needed to support their case for opposing interest rate increases.
He went on to say that the survey suggested a softening in the economy.
Deloitte & Touche