Manufacturers plan price hikes despite poor market performance

Posted on 22 May 2008 by The Manufacturer

Manufacturers will hike their prices over the next quarter despite bleak forecasts for demand, according to a survey by the Confederation of British Industry (CBI).

Thirty-six per cent of responding companies say they will charge more for goods and services in the coming months while just six per cent plan price-drops. This represents the largest gap between increases and decreases since February 1995.

The data from the survey suggests that 31% of companies have fewer orders than usual lined up and only 21% have more. The general consensus is that current trading levels will remain consistent in the next three months.

Rising oil costs are touted as the stumbling block to any hopes of lowering prices to entice business. Energy, as well as commodity based industries, are, through established cross-sector links, powerless to digress from price trends in the oil industry.

Ian McCafferty, chief economic adviser at the CBI, said:

“It is clear from the pricing data in the survey that manufacturers are really feeling the impact and having to pass their increasing costs on. Oil prices rose more than 75 per cent over the last year, and 14 per cent in the last month alone. These rising inflationary pressure make it even more unlikely that we will see the cuts in interest rates expected by the markets only a few weeks ago.”

The CBI produces market data based on its monthly Industrial Trends Survey which, in May, sourced responses from 543 manufacturing firms. The CBI represents 80 of the FTSE 100 and over 200,000 companies in all.