CBI says confidence hits nine-month low

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The Independent Online

The pace of Britain's manufacturing recovery slowed as factories imposed their first prices rises for eight years, a key industry survey showed yesterday.

The pace of Britain's manufacturing recovery slowed as factories imposed their first prices rises for eight years, a key industry survey showed yesterday.

The Confederation of British Industry said the number of firms reporting a rise in orders over the three months to July fell to its lowest level since October.

Confidence also fell to a nine-month low as companies forecast a slowdown in output and orders.

The CBI said companies had been hurt by rising UK interest rates and a slowdown in demand from the giant export markets of the US and China. "The pace of the upturn has eased but in no sense are we witnessing the end of the manufacturing recovery," Ian McCafferty, the CBI's chief economic adviser, said.

Companies said the sharp rise in oil and commodity prices had pushed up input costs at the fastest rate for more than eight years.

Factories managed to pass on some costs in the form of price rises, with the cost of goods for the UK market rising for the first time since April 1996. "The of price deflation in the sector has come to an end," its report said, but it said rising costs were "severely squeezing" profit margins. "This has delayed the long-awaited turnaround in manufacturing investment," Mr McCafferty said.

However, there were other positive signs, with the number of factories operating below capacity falling to a six-year low of 54 per cent. They also hired staff for the first time in seven years while a growing number reported difficulties in recruiting skilled employees.

The pound fell against the dollar after news of the survey findings leaked out, although analysts said the slowdown would not be enough to prevent the Bank of England from raising interest rates next week.

"The broad message is that a phase of consolidation is giving way to early signs of softening, although signs of slowing are certainly not precipitous," Malcolm Barr, the UK economist at JP Morgan, said.

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