British factories pare back price hike intentions on cooling demand

British factories’ are paring back their expectations of price hikes in a sign that inflation may be beginning to ease, reveals a closely watched survey published today.

The proportion of manufacturers planning to raise prices over the next three months fell to 58 per cent in June, the lowest level since September and down from 75 per cent in May, according to research by the Confederation of British Industry (CBI).

The new figures are among the first signs that businesses are swallowing thinner margins and taming price rises in anticipation of high inflation prompting a slowdown in household spending.

“Producers appear to be accepting a squeeze on their margins now that growth in demand has slowed and stocks of finished goods are reported by a slight majority of firms to be more than adequate to meet demand,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.

Anna Leach, deputy chief economist at the CBI, said the data suggests we are “seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector”.

Although price expectations are receding, the proportion of manufacturers intent on raising prices is still elevated by the CBI survey’s historical average.

UK consumer inflation has climbed to a 40-year high of nine per cent and is expected by the Bank of England to peak at just over 11 per cent in October when the energy watchdog hikes the cap on bills again.

New cost of living figures are published tomorrow, with the City expecting the rate to hit 9.1 per cent.