Business | General
UK companies raise prices at record pace
Growth in manufacturing edges up as input costs soar at the strongest rate in three years.
- Reuters
- Published: 00:31 March 4, 2008
London: British manufacturers ramped up prices at the fastest rate on record in February as growth in the sector edged up from near stagnation and input costs soared at the strongest pace in three years, a survey showed yesterday.
Such a strong signal that companies are seeking to pass on surging raw materials and energy costs to customers is likely to worry Bank of England policymakers as they try to steer the economy away from a sharp slowdown.
The Chartered Institute of Purchasing and Supply/NTC purchasing managers' index picked up to 51.3 last month, just above forecasts for a reading of 51, from 50.7 in January.
A reading above 50 indicates expansion, while anything below points to contraction.
The output price index jumped to 59.9 from 57.9 in January, the strong-est inflation in prices charged to customers since that series began in 1999.
Sterling rose after the data and analysts said the strong inflation indicators cemented expectations that the BoE will hold rates at 5.25 per cent at its meeting this week.
The central bank may find it difficult to deliver many more interest rate cuts this year if price pressures continue to intensify, especially if the manufacturing sector avoids falling into a sustained period of contraction.
In sync
"This report fits with the flavour of other recent indicators - that activity isn't particularly good and the risks are of worse news ahead," said Alan Clarke, an economist at BNP Paribas.
"However, with inflation leading indicators heading in the wrong direction this is going to make it very hard for the Monetary Policy Committee to step up the pace of interest rate easing in the very near term."
There looks like being no let-up in simmering inflationary pressure throughout the factory pipeline, with the input prices index rising to 72.2 last month from 69.7 in January - the strongest cost inflation since November 2004.
"Almost half of the survey panel reported a rise in their purchasing costs, which they attributed to high prices for chemicals, energy, food products, metals, oil and plastics," CIPS/NTC said in a statement.
British manufacturers are also feeling the impact of the global credit crunch, with new export orders contracting for the second month in a row.
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