January 23, 2018 / 11:41 AM / a year ago

UK factories start year strongly but price pressures soar to 34-year high - CBI

FILE PHOTO: A worker checks a TX4 at the end of the production line at the London Taxi Company in Coventry, central England, September 11, 2013. REUTERS/Darren Staples/File Photo

LONDON, Jan 23 (Reuters) - British manufacturing grew strongly in January, helped by export demand, but the proportion of factories expecting to raise prices hit a 34-year high, a survey showed on Tuesday.

The Confederation of British Industry’s (CBI) monthly order book balance eased to +14 from December’s almost 30-year high of +17. A Reuters poll of economists had pointed to a reading of +12.

British exporters have benefitted from a pickup in the global economy and a fall in the value of the pound after the 2016 Brexit vote.

While the Bank of England will be heartened to see continued strong growth in manufacturing, a likely increase in factory selling prices indicated in Tuesday’s survey will be less welcome.

The CBI’s expected prices balance rose to +40 from +23 in December, its highest level since January 1984.

“It’s good to see manufacturing going from strength to strength with growth up and the buoyant global economy boosting export orders,” CBI chief economist Rain Newton-Smith said.

“But the past depreciation in sterling continues to leave its mark on firms’ costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.”

The CBI’s quarterly version of the survey, also on published on Tuesday, showed strong demand from abroad. Its gauge of export deliveries hit its highest level since 1977.

While measures of investment also improved compared with the previous quarter, they remained in line with levels seen over the last year.

Reporting by Andy Bruce, editing by William Schomberg

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