UK businesses report easing price pressures: BoE survey



By David Milliken

LONDON, Dec 1 (Reuters) - British businesses reported cooling price pressures but warned of lower employment and investment ahead, in a Bank of England survey on Thursday that should reassure policymakers that their interest rate rises are taking effect.

Businesses on average reported that they have raised prices by 7.2% over the 12 months to November, the smallest amount since April, and expected prices to rise by 5.7% over the coming year, the least since February.

The BoE looks closely at surveys of businesses' pricing expectations for a guide as to how persistent inflation is likely to be, and how much it needs to raise interest rates.

Inflation expectations among the British public have also fallen from their peak in August, according to a monthly survey by Citi and YouGov

released

on Wednesday.

Manufacturing purchasing managers' index (

PMI

) data on Thursday showed British factory output prices rose at the weakest pace since March 2021.

Consumer price inflation hit a 41-year high of 11.1% in October, more than five times the BoE's 2% target, and the BoE survey showed businesses expected it to be 7.2% in a year's time and 3.9% in three years.

In outright terms, expectations for CPI and producer prices remain higher than the BoE might like. When CPI was last on target, the producer price measure was typically in a 2-3% range.

Financial markets expect the BoE to raise interest rates to 3.5% from 3% on Dec. 15, after a three-quarter-point rise in November.

Both the BoE and the government's Office for Budget Responsibility estimate that Britain's economy has slipped into recession, due mostly to surging energy costs but also reflecting increased interest rates.

Businesses also said in the BoE survey that higher borrowing costs would lower their capital spending by 8.4% and employment by 2.3%, despite some easing in hiring difficulties.

The BoE survey, known as the Decision Maker Panel, took place from Nov. 4 to Nov. 18 and was based on responses from 2,601 firms.
Reporting by David Milliken, Editing by Kylie MacLellan and Andy Bruce

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.