Producer price rises slow as demand softens - CBI

UK manufacturers saw both output and orders ease in the three months to March, a survey published on Wednesday showed.

According to the latest CBI Industrial Trends Survey, manufacturing output volumes fell in March, with a weighted balance of -6 compared to -16 in the three months to February.

A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.

Output fell in nine of the 17 sub-sectors, including food, drink and tobacco, mechanical engineering, and paper, printing and media.

Total order books, meanwhile, were seen as below normal for the time of year, with a balance of -20, down on February’s -16 and the weakest position since February 2021. Analysts had been looking for a balance of around -15.

Output was forecast to rise in the three months to June, however, with a balance of 12, while expectations for average selling price inflation eased notably. The net balance of manufacturers intending to increase output prices over the next three months fell from 40 to 25, the lowest balance since March 2021, though selling price expectations remain well above the long-run average.

Anna Leach, deputy chief economist at the CBI, said: "Falling output and softer order books highlight the challenging demand environment for UK manufacturing. Together with some easing of input costs, this seems to be feeding through to a marked weakening in selling price expectations for the next quarter."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Manufacturers are slowing the pace of price rises in response to weak demand and falling energy costs.

"It points to core producer output price inflation slowing to about 5% by mid-year, from 11.3% in January. In addition, a small net balance of manufacturers continued to report that stock levels were more than adequate to meet demand, suggesting that some may cut prices to run down inventories.

"All told, the CBI’s survey provides reassurance that the headline rate of CPI inflation still will fall rapidly this year, despite its unexpected pick up in February."

Earlier on Wednesday the Office For National Statistics reported that annual CPI inflation had jumped in January, to 10.4% from 10.1% a month previously, against expectations for 9.9%.

The CBI survey was carried out between 23 February and 14 March, with 264 manufacturers responding.