London, United Kingdom. British businesses increased their expectations for selling price growth in the year ahead, according to Bank of England surveys that added to recent signs of persistent inflation pressure from companies.
Selling price expectations rise
The BoE’s Decision Maker Panel showed companies in April expected price growth of 4.4 per cent in the 12 months ahead, up from 3.7 per cent in March and the highest reading since January 2024.
Two long-running business surveys also showed record increases in some gauges of company pricing, raising questions over BoE Governor Andrew Bailey’s view that businesses’ pricing power is limited, partly due to a weakening labour market and tepid demand.
Firms weigh costs against demand
A separate survey produced by the central bank’s network of regional agents said businesses appeared “minded to pass on at least some of the cost rises that have or are expected to come through, because their profit margins are already squeezed”.
The agents’ survey also found companies were concerned about weak demand, suggesting they are likely to raise prices cautiously.
Sales outlook weakens while inflation expectations jump
The Decision Maker Panel survey’s measure of expected sales growth over the year ahead fell to its lowest level since July 2020, when the COVID-19 pandemic was in full swing.
Companies’ expectations for consumer price inflation over the next 12 months rose to 4.0 per cent in April from 3.5 per cent in March, the highest level since December 2023, while longer-term expectations were stable, which the report said would reassure members of the Monetary Policy Committee.
Wage growth expectations showed little change.
Rate decision watched for policy shifts
The BoE is expected to leave interest rates unchanged on Thursday, but investors expecting between two and three quarter-point increases in borrowing costs this year will be watching for any shift in policymakers’ views.
How do you expect changes in UK business pricing and demand to affect household budgets over the next year?
