A combination of interest rate rises and one of the wettest summers on record have slowed demand for consumer services such as holidays and beauty treatments, according to a report today.

The CBI said sales fell across the travel, leisure and personal care sectors in the past three months.

Hotels, bars and restaurants were the only ones in the sector to record a good rate of growth, said the report. By contrast there was strong demand for professional services to businesses, such as accountancy, law and property.

Consumer firms' hopes had been raised by unexpectedly strong demand for their services in the previous three months, but their expectations for continued strong growth this quarter were dashed.

This summer's poor weather may have played a part in dampening demand for outdoor leisure activities and travel in the UK.

Firms across the services industry as a whole are more cautious about prospects for the next quarter, according to the survey of 144 companies.

Ian McCafferty, CBI chief economic adviser, said: "While demand for business and professional services remains strong with a fourth consecutive quarter of buoyant growth, the same cannot be said for consumer services.

"A combination of higher household borrowing costs and poor weather has put a dampener on consumers' spending over the last three months, and on travel and leisure in particular.

"Consumer services firms don't expect to expand their businesses in the coming year. Costs are expected to continue growing at a rapid rate, with less scope for firms to raise prices, which will inevitably put profit margins under greater strain."

As a result of the downturn investment plans for the year ahead have been scaled back, and are particularly weak for consumer services.

Alysoun Stewart, of Grant Thornton, which helped with the study, said: "Optimism levels among consumer services firms have plummeted to levels not seen since February 2003, clearly indicating that successive interest rate rises over the past year have begun to bite."

Meanwhile, in a separate report also published today, the Engineering Employers Federation said manufacturers were continuing to enjoy healthy growth. Exports and domestic orders improved in recent months across all regions and industries in the third quarter of 2007.

In the Midlands, a balance of +22 firms had seen an increase in domestic orders and +11 in exports, both significantly exceeding expectations.

The number of Midland firms reporting an increase in export orders is now at its highest level for five quarters, while domestic orders have increased in six out of the last seven quarters.

Companies are predicting more good news in the fourth quarter, forecasting further increases in output, orders, profit and cashflow, the survey said.

But there is less optimism over export orders, with many uncertain how the turbulence in the world markets will affect them.

Looking forward +26 firms of the 200 surveyed expected improved domestic sales and +9 domestic sales. Plus six firms saw jobs increase, a figure which dropped to +3 of companies which expect to increase their workforce in the next three months.

Ian Smith, chief executive of EEF West Midlands, said: "The survey is very encouraging for manufacturers in the West Midlands.

"It seems that the region's economy, and especially the manufacturing sector, turned the corner last year and if the predictions are right the good news is set to continue for some time.

"There is no doubt the UK economy is providing a welcome boost, but the current turbulence in the financial markets and a more significant slowdown in the US could weaken the outlook.

"However, manufacturers are posting very good results despite higher interest rates, the continued strength of the pound against the dollar and high commodity prices. This shows the manufacturing sector is better equipped to deal with such problems than it has been for some time."