Manufacturers expect to put up prices at 12 year high

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Manufacturing News, Source : TheManufacturer.com
Published : 24 May 2007 11:31

Manufacturers are growing more confident about their ability to increase prices with the balance of firms expecting to put them up next quarter the highest for 12 years, the CBI said today.

Its May Industrial Trends Survey reveals 32 per cent of manufacturers expect average domestic prices to rise over the next three months compared to eight per cent who say they will fall.

The rounded balance of +25 per cent is the highest since March 1995, when it reached +27 per cent, and is the 12th consecutive positive balance, in a broadly upward trend, since last May.

Prices are most likely to rise for intermediate goods, such as timber or chemicals, and consumer goods (balances of +33 per cent and +28 per cent respectively). Prices for capital goods are also picking up although to a lesser extent (a balance of +nine per cent).

The Industrial Trends Survey, which has been running since 1958, was conducted between April 24 and May 16 and there were 659 respondents.

It showed that 32 per cent of firms said total orders were above normal compared to 26 per cent who said they were below normal.

The rounded balance of plus five per cent was slightly lower than March's peak of plus eight per cent but continued the improved position since the turn of the year.

Export demand has weakened slightly over the past two surveys. In May twenty per cent of firms said overseas orders were below normal compared to 19 per cent saying they were above normal (rounded balance of minus eight per cent).

Output volumes are expected to grow strongly over the next three months in line with results since February, with a balance of plus 18 per cent of firms saying it will increase. Growth is expected to be strongest for intermediate goods.

Ian McCafferty, CBI Chief Economic Adviser, said: "In spite of the slight weakening in export orders the manufacturing sector continues to go from strength to strength with healthy order books, solid output growth and continued ability to put up prices, reversing the squeeze in profit margins of last year.

"However we have not yet seen the impact of the four recent rises in interest rates on domestic demand so, while this data will be closely monitored by the Bank, there is little justification for another rate rise immediately."