Bank of England: Businesses to see inflation rising noticeably in 2017

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Costs paid by British companies for materials and imports rose at the fastest pace in around five years in the fourth quarter, something that will cause inflation to rise noticeably next year, a Bank of England (BoE) survey indicates.

Growth in both services and manufacturing sectors improved a little in the fourth quarter, helped by the strongest reading for factory exports since the third quarter of 2014, according to the BoE survey, based on the findings of its regional agents.

Join an exclusive 2017 economic briefing by Bank of England East Midlands Agent Alastair Cunningham at the Lincolnshire Business Expo on January 18, 2017.

But the BoE said input costs had risen sharply. A spokesperson said: “That was expected to start affecting consumer prices more noticeably in the New Year.

“Wage growth had remained stable, but some contacts expected upward pressures, including from higher inflation next year.”

The survey showed that by a margin of 50% to 10%, survey respondents believed that the economy would end up weaker rather than stronger if prices started to rise faster, compared with 44% to 10% in August.

When asked what would be ‘best for the economy’ – higher interest rates, lower rates or no change – 21% thought rates should ‘go up’, up from 20% in August. Whilst 16% of respondents thought that interest rates should ‘go down’, compared to 15% in August.

Some 36% thought interest rates should ‘stay where they are’, unchanged since August.