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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (21283)	7/5/1998 3:52:00 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 94695

Cash flow problems on the rise - from the UK newspapers the Telegraph By Bill Jamieson ALMOST one in four companies are suffering cash flow problems due to falling orders and default by customers, according to a Lloyds Bank business survey. The survey, out today, just days ahead of a meeting of the Bank of England's Monetary Policy Committee on interest rates, warns that the worsening economic slowdown has now filtered into the service sector - the most resilient area of the economy until now. It shows that business confidence has fallen to its lowest level since the recession. And it predicts that sales and order growth will slow further over the rest of the year. The Business in Britain Survey, by Lloyds Bank Commercial Services, says 24 per cent of respondents reported cash flow problems compared with 22 per cent six months ago. The problems are particularly notable in construction (31 per cent) and are now evident in retailing (21 per cent). Although late payment remains the key problem, Lloyds Bank says many companies are reporting pressures because of a lack of business anddefault by customers. The survey findings go to the heart of the MPC's dilemma on whether to raise interest rates from the current 7.5 per cent level. Eddie George, Bank of England governor and MPC chairman, has hinted that rates may have to rise to curb earnings growth, particularly in the service sector. He has also said that only firm evidence of an economy-wide slowdown would persuade the MPC to lower rates. The survey tracks responses from 2,000 companies with sales of between œ1m and œ100m. Its confidence index, tracking expectations for order books, profits and turnover, has fallen 15 per cent since a year ago. And for the first time since the survey began the results show a negative balance on exports, with 32 per cent reporting increased orders and 36 per cent reporting decreases. In a separate report out today, the Centre for Economics and Business Research warns of a heightened risk of a mini-recession next year, caused by rising wage pressure, an excessively strong exchange rate and wilting manufacturing output. The quarterly report, by former CBI chief economist Douglas McWilliams, predicts that economic growth this year will fall to 1.6 per cent, from 3.1 per cent in 1997, and that next year will also see sub-trend growth, of just under 1.8 per cent. McWilliams said: "With underlying inflation expected to stay above 3 per cent for the rest of this year, and the minimum wage adding to labour market pressures, there is a growing risk that 1999 may see a very hard landing for the economy." Figures for industrial output in May due tomorrow are expected to be flat, though the annual rate of increase should rise sharply as a big fall last year drops out of the comparison. Overall industrial production is likely to be weaker as recent sharp rises in utilities and oil output go into reverse. 4 July 1998: Slowdown may ease rates pressure Haim