Firms' price pressures seen at highest in decade

By Raissa Kasolowsky

LONDON (Reuters) - More companies feel under pressure to raise prices than at any time in over a decade and demand, both domestic and from abroad, is slowing, a survey showed on Thursday.

The British Chamber of Commerce (BCC) said its quarterly survey showed pricing intention balances for manufacturing and services companies climbed to +42 and +43 respectively, the highest on both measures since records began in 1997.

But the survey also showed that the home order balances for manufacturing firms fell sharply to +8 in Q1 from +27 in Q4, the lowest in over two years, and the sector's export performance was also at a two-year low.

The survey highlights the dilemma facing the Bank of England as it grapples with slowing growth and rising price pressures.

"The unpleasant mixture of sharply slowing growth, and increases to new peaks in intentions to raise prices, confronts the Monetary Policy Committee with difficult choices," said David Kern, the BCC economic adviser.

"Inflationary risks cannot be ignored, but with demand weakening and capacity utilisation balances declining firms are unlikely to secure big price increases in spite of their intentions."

The BCC reiterated its call for the Bank to lower interest rates to shore up the economy in the face of deepening credit market turmoil. The central bank is widely expected to cut interest rates at midday to 5 percent.

All figures are expressed as a percentage balance of firms reporting an increase over those reporting a decrease, except categories marked (^) which show a pure percentage of firms: