Prices forecast to rise as sales slow

There were more mixed signals on the British economy today as one survey showed a significant rise in the number of firms which expect to raise prices in 1998, while a second survey pointed to the slowest growth in sales for five years.

Dun & Bradstreet published a survey showing that more than six out of 10 business managers questioned said they expected to increase prices this quarter compared with 57.7 per cent in the last quarter of 1997. This could "strengthen demands for an increase in interest rates," according to the business information company.

In Scotland and the West Midlands the proportion of firms expecting to increase prices has grown by 10 per cent but in Wales and the East Midlands there are no signs of inflationary pressures, according to Dun & Bradstreet.

The Chartered Institute of Marketing (CIM) predicts, however, that there will be a slowdown in sales growth which will make companies cautious, leading to price increases of 0.7 per cent, the lowest level predicted by the CIM Marketing Trends Survey since 1994.

The Chartered Institute of Marketing adds: "Inflation for all goods and services across the economy will fall below 0.7 per cent - an indication that interest rates are less likely to rise this year."

The CIM forecasts a gradual slowdown for the economy as opposed to a crash. Its marketing trends survey forecasts sales growth will reach 5.1 per cent this year, 0.6 per cent down on 1997. This drop reflects the general expectation of a less buoyant economy in 1998, with reduced inflation, high interest rates and a strong pound, according to the CIM.

The service sector continues to roar on, however. CIM predicts sales growth of 8.8 per cent for financial services and 9.0 per cent for business and property services.