British manufacturing activity growth slowed more than expected in October but firms raised their prices at the sharpest rate in three months, a new survey shows today.
The CIPS/RBS Purchasing Managers' Index slipped last month to 53.7, still keeping above the 50 mark separating growth from contraction, from an upwardly revised 54.5 in September. Analysts had expected a reading of 54.
But the figures are unlikely to alter expectations that the Bank of England will raise interest rates next week to 5% from 4.75% especially as policymakers may be concerned that business appears to be passing on higher costs. 'Strong demand encouraged a number of firms to raise their charges,' the report said.
The output prices index rose to a three-month high of 56 in October from 55.1, though costs rose at a slower, if still sharp, rate. The input costs index fell noticeably to 63.1, its lowest since January, from 66.7.
The Bank of England has been worried that firms will attempt to rebuild margins eroded by high energy costs and this could put further pressure on inflation, which has been above its 2% target for the last five months.
But other components in the PMI survey were not so strong. The output index slipped to 55.4 in October from 59.1 in September, while total new orders growth eased to 54.7 last month from 55. Export orders picked up slightly to 53.9.
But RBS Group chief economist Andrew McLaughlin said the manufacturing sector should be well supported for the rest of this year. 'Domestic demand is holding up particularly well, whilst signs that export order volumes are picking up will provide an important boost to manufacturing expansion through Q4,' McLaughlin said.
However, firms were in no hurry to take on new staff to meet increased demand for their goods. The employment index eased to 50 - signalling no change in employment levels - from 50.6 in September.
