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UK factory orders fall but prices to rise, says CBI

UK factory orders fell in January, but manufacturers plan to raise prices sharply in the next three months, according to the CBI business group.

Its quarterly industrial trends survey of 394 manufacturers recorded a drop in its total order book balance to -16% this month from -3% in December.

Despite the drop, the CBI said "the recovery in the manufacturing sector is firmly in place".

But it did warn that upcoming price rises would fuel inflation.

The CBI said production had increased in the past three months, driven primarily by growth in export orders, and would continue to expand over the next quarter.

"It is also encouraging to see that employment prospects in the sector have risen for the second consecutive quarter and manufacturers' confidence is improving," said the group's chief economic adviser, Ian McCafferty.
'Inflationary pressure'

However, he warned that manufacturers were under "intense pressure" to pass on the rising cost in raw materials.

They had raised prices "markedly" in the past quarter and "expect to raise them at an even faster pace over the next three months", Mr McCafferty said.

"This will drive further inflationary pressure in the wider economy."

Figures released earlier this week showed that inflation, as measured by the Consumer Price Index, rose to 3.7% in December, up from 3.3% in November.

The Retail Price Index, which includes mortgage interest repayments, rose to 4.8% from 4.7%.

This fuelled speculation that the Bank of England may raise interest rates earlier than it had planned.

BBC News

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