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Businesses in the West Midlands are counting on a continued reversal of soaring inflation to improve their fortunes in 2012, according to a new survey.

The West Midlands Chamber of Commerce's (WMCC) latest quarterly economic survey revealed the region's service sector was growing at a subdued rate while the manufacturing industry also "shows signs of slowing".

The number of companies in the service sector reporting an increase in their domestic and export sales is up by only 1 per cent at 37 per cent compared with the previous quarter.

Manufacturing businesses are also facing a continued struggle, said the research.

There was a drop in the number of companies reporting increased home sales from 45 per cent in the previous quarter to 41 per cent.

Exports performed little better among manufacturers with increased sales down to 37 per cent from 43 per cent and orders dropping from 37 per cent to 34 per cent.

Mike Ashton, spokesman for the WMCC, said: "Inflation has been rampant for many months and this has had a significant impact on demand and confidence. Many businesses are holding off on investment and hiring in the hope that the global economy can bounce back from the many shocks that it has suffered.

"We expect to see inflation begin to fall back in the coming months to the 2 per cent target set by the government for the Bank of England and many businesses will be counting on it. Inflation is currently running at 4.8 per cent and, thankfully, has fallen for the past two months.

"We hope that trend will continue. Much of the cause of inflation was through events abroad which have been out of our control. Provided there is a solution to the eurozone crisis we are optimistic that business will begin to turn things around."