January 2011 | Lindsay Clark
Manufacturers will continue to pass on the rising
cost of raw materials to buyers, business research has found.
A survey by the Confederation of British Industry (CBI)
showed there are a growing number of firms increasing prices to purchasers
against a backdrop of increasing production and demand.
The study of 394 manufacturers in the UK found 32
per cent had seen output grow over the past three months, while 16 per cent
said that it had fallen, giving a balance of plus 16 per cent. This was driven
primarily by growth in export orders, at plus 13 per cent, with domestic demand
rising more modestly at plus 9 per cent.
Manufacturers have raised output prices markedly
during the last quarter, the January Quarterly Industrial Trends Survey
said. While domestic prices rose at plus 13 per cent of firms, exports were
plus 14 per cent. Both the figures represent the biggest difference between
firms since October 2008. Price increases are expected to accelerate sharply
over the next three months. A balance of plus 31 per cent of firms expect
domestic prices to rise while plus 34 per cent see export prices increasing.
The number of firms expecting to increase export prices is the highest since
The figures support evidence the increasing costs
of raw materials is being passed down through the supply chain.
Ian McCafferty, CBI chief economic adviser, said:
“Production has been boosted this quarter by a strengthening in both domestic
and overseas demand and, over the next three months, companies expect further
growth, driven by another rise in export orders.
“But manufacturers have come under intense
pressure to pass on rising costs: they have increased prices markedly in this
quarter, and expect to raise them at an even faster pace over the next three
months. This will drive further inflationary pressure in the wider economy.”