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Manufacturers wary of inflationary pressures says CBI

20 March 2012

UK manufacturers expectations for output growth are at their strongest for a year, but firms also expect to have to raise prices significantly, says the CBI. Of the 436 manufacturers responding to the latest CBI monthly Industrial Trends Survey, 39 percent believe that output would rise in the next three months, while 15 percent expected that it would fall. The resulting balance of +24 percent is the strongest since March 2011 (+27 percent).

Ian McCafferty
Ian McCafferty

Order books in March remained well above their long-run average, and their levels of late last year, albeit a little lower than last month. While 18 percent reported total orders were above normal, 26 percent said they were below. The resulting balance of -8 percent is stronger than the long-run average for this measure (-17 percent).

Similarly, at -11 percent, export demand also weakened, but remained considerably above its long-run average (-21 percent).

However, expectations for output price inflation have picked up. A balance of +24 percent of firms expect to raise output prices in the coming quarter, the highest since June 2011 (+27 percent).

Ian McCafferty (pictured), CBI Chief Economic Adviser, said: “The recovery in the manufacturing sector seems to be building some momentum. Firms again expect a strong rise in output over the next three months, on the back of above-average order books. However, expectations for output price inflation have also moved higher, most probably reflecting the recent rise in oil prices. Any further rise in oil prices would be a significant concern, given the additional cost burden this would place on UK manufacturers and the knock-on effects it could have on the nascent recovery.”

Stocks of finished goods remained above adequate (+17 percent). The balance has changed little since November 2011, staying broadly in line with the long-run average (+14 percent).

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