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British factory input prices may clobber manufacturing investment
February 13, 2017 / 3:57 PM / 7 months ago

British factory input prices may clobber manufacturing investment

Rolls Royce Trent XWB engines, designed specifically for the Airbus A350 family of aircraft, are seen on the assembly line at the Rolls Royce factory in Derby, November 30, 2016. REUTERS/Paul Ellis/Pool

LONDON (Reuters) - Reuters polls are forecasting that British factory input prices will show an 18.3 percent year-on-year increase In January, up from 15.8 percent a month earlier, when they are released on Tuesday.

That would be the highest level since 2008 - and it could spell trouble ahead for British manufacturing.

As the following graphic shows - bit.ly/2lHPptw - factory input prices have pretty much run with an inverse relationship to manufacturing investment in recent years, as tracked by the British Chambers of Commerce.

Statistically, there is a strong inverse correlation co-efficient above 0.7 a quarter ahead.

The input prices are being driven by the Brexit-led fall in sterling. Slumping manufacturing investment would be a second-round effect, according to the numbers.

Reporting by Jeremy Gaunt and Andy Bruce, editing by Larry King

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