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(Bloomberg) — UK businesses raised prices at the fastest pace in over three years, as they sought to pass on soaring raw material and energy costs to consumers despite a subdued economic backdrop.
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S&P Global’s survey of the private sector showed six in 10 firms saw their cost burden rise in April, with firms reporting higher fuel and wage costs as well as increasing prices for metals and plastics.
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Output price inflation picked up to the highest since January 2023. Many businesses reported using fuel surcharges to offset input costs now increasing at their fastest pace since the aftermath of Russia’s invasion of Ukraine.
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Bank of England Governor Andrew Bailey has pointed to weak corporate pricing power as a possible factor that could contain second-round inflation effects caused by the energy price spike. However, the PMI survey suggests many firms are already managing to make price increases stick, raising the risk of a feedback loop as workers try to bid up wages to preserve their standard of living.
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With the Middle East crisis showing no sign of ending, several BOE policymakers suggested they might back interest-rate hikes in the future after holding off immediate action last week.
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S&P’s overall purchasing managers’ index was slightly better than first estimated in April. The composite PMI rose to 52.6 last month, a rebound from 50.3 in March and better than the flash reading of 52.
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Still, the conflict in Iran loomed large with demand from overseas waning, job cuts continuing and new orders stagnant. The improvement in April could “easily prove short-lived” given the subdued new business figures, according to Tim Moore, economics director at S&P Global Market Intelligence.
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“Survey respondents widely noted that the Middle East conflict and subsequent global supply chain disruptions had weighed heavily on business and consumer confidence,” he said.
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