Mixed signals give uncertain outlook

This quarter the Greater Manchester economy has had a varied performance following the noticeable recovery last quarter, according to the latest survey of Greater Manchester Chamber members.

UK Sales and orders have declined in all areas except service sales, which improved slightly. Similarly, service sector export orders is the only export indicator to have increased.

The survey also showed that:

• Manufacturers’ previous recovery has taken a downward turn, although UK markets are still stronger than in 2005.
• Hesitation in the overseas market last quarter has continued, but results are more mixed across sectors.
• Employment levels continue to rise, with further increases expected next quarter.
• Confidence has continued to increase for service firms, but manufacturers have seen a confidence fall, following last quarter’s growth.
• Investment continues to rise for plant and machinery among manufacturers, but has disappointingly fallen in all other areas.

The mixed findings from the survey make it difficult to draw a defining picture. The outlook is slightly more positive for service firms, and employment levels are still rising industry wide, but the diversity of results places the Greater Manchester economy in an uncertain position. Even so, 2006 is still a considerable improvement on the poor overall performance observed in 2005.

Adam Howell, Economic Research Executive at the Chamber, said: “Messages of uncertainty from Chamber members are of concern this quarter, but there are signs of optimism within the results. Particularly pleasing are the increased employment levels in the sub-region. This has been observed across industry and further increases are expected.

“Even though fears over competition have cooled, more firms are looking to raise prices over the next three months due to intense pressure at the margins. Furthermore, increasing inflation has been reported as a big concern among our members. This rise in inflation appears to have negatively impacted on UK firms’ ability to compete in the overseas markets. This issue will be addressed by the Bank of England next month with a possible increase in the interest rate, and whilst we understand the motives behind the Bank’s decision we would place emphasis on the fragility of the current recovery and stress that further interest rate rises may impair this.”

More than 475 member companies responded to the Greater Manchester Chamber of Commerce Quarterly Economic Survey.