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Factory-Gate inflation

  A survey has revealed that a record number of manufacturers are raising prices, with factory-gate inflation of up to 10 per cent becoming “built-in” to customers’ expectations. 

“While manufacturers will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye-watering impact of escalating cost pressures,” James Brougham, senior economist at Make UK, said. 

A balance of 52 per cent of firms said they were increasing prices in the fourth quarter, up from 50 per cent in the third. However, customers have accepted the higher costs “without a response”, suggesting that inflation is “becoming built-in”. 

Price increases of 10 per cent have become a “regular occurrence”, it said.

To underline how “sharply inflation has bitten”, it said the balance of firms raising prices stood at just 4 per cent in the fourth quarter of 2019, before Britain left the European Union. 

Price increases of 10 per cent have become a “regular occurrence”, it said. 

Make UK said that the manufacturing sector continues to achieve growth but warned it had seen “some evidence of slowing activity”. 

Manufacturers are responding to intense inflationary pressures that show “little if any, a sign of abating”, it found. 

Despite the leap in inflation, the Bank is expected to keep interest rates at their historic low of 0.1 per cent as policymakers may need more time to assess the impact of the Omicron variant on public health and the economy. Although there is little sign that inflationary pressure will start to ease soon, their prospects remain relatively rosy as demand from large export markets “looks reasonably strong”, he added. 

According to the survey by the trade body Make UK, companies have increased their prices for a fourth-quarter in a row, and buyers must brace themselves for further rises in the first three months of next year. 

The current reading is the highest since 2000 when Make UK began monitoring inflation expectations. 

Summarised www.sba.tax
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