Recovery hopes boosted by upbeat manufacturing outlook
Hopes of a recovery in the manufacturing sector were boosted yesterday after a survey revealed firms expect the strongest rise in trade for a year.
The report by business body the CBI showed a balance of 24% of firms expect output to rise over the next three months - its strongest reading since last March, improving the outlook for the UK's stalling economic recovery.
But the survey warned that manufacturers are likely to raise their prices in the coming quarter, with the balance for this measure at its highest since June amid spiralling oil prices.
Growing inflationary pressures could hamper the UK's recovery by stifling consumer spending.
CBI chief economic adviser Ian McCafferty said: "The recovery in the manufacturing sector seems to be building some momentum.
"However, expectations for output price inflation have also moved higher, most probably reflecting the recent rise in oil prices.
"Any further rise in oil prices would be a significant concern, given the additional cost burden this would place on UK manufacturers and the knock-on effects it could have on the nascent recovery."
The warning comes on the day the Office for National Statistics revealed that the consumer prices index rate of inflation dipped to 3.4%, compared to 3.6% in January, helped by falling electricity and gas bills. This was not quite as low as the 3.3% expected by the City, as the falls were held back by alcohol price hikes.
The survey showed that order books both at home and overseas were above their long-run average, although they had slowed slightly since last month.