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UK factory inflation hits 1970s-style high – CBI

UK manufacturing inflation expectations have hit a high not seen since the mid-1970s, a CBI survey showed.
The balance of manufacturers expecting price rises in the next three months rose to +77% in February – the highest score since December 1976, the business lobby said. The balance is the difference between respondents expecting an increase and a decline.

In December 1976 the UK was bailed out by the International Monetary Fund as the Labour government led by Jim Callaghan was buffeted by sterling crises and inflation in double figures. Punk rock had exploded onto the music scene but the charts remained dominated by mainstream acts such as Showaddywaddy, Smokie and David Soul.

Inflation expectations peaked in February 2022 as output growth accelerated in the three months to February to +26% from +24%. Output rose in 13 out of 17 categories driven by chemicals and food, drink and tobacco.

Order books were strong but stocks of finished goods continued to be below requirements though the score improved from -17% to -14%.

Healthy orders are good news for the sector but surging factory prices will provide a further headache for the Bank of England as it tries to balance uncertain growth prospects and accelerating inflation. Chancellor Rishi Sunak is due to present his spring mini-budget on 23 March and will face pressure to help households and businesses hit by soaring energy bills and other costs.

Anna Leach, the CBI’s deputy chief economist, said: “Manufacturers will be buoyed by strong order books and output growth, but amid ongoing cost pressures, almost four in five firms expect to increase prices in the next three months.

“With high inflation dampening growth prospects in the wider economy, the government must use the spring statement to help get businesses investing more, supporting higher growth, productivity and wages.”

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