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Input price annual inflation rose from 20.1 per cent in March to 23.3 per cent in April.

Month on month, the output prices measure for all manufactured products rose 1.4 per cent in April, mainly reflecting rises in other manufactured product prices.

If passed on in full, the changes in excise duty on tobacco and alcohol announced in the Budget would have increased the index by 0.3 per cent in April.

The 'narrow' output prices measure, which leaves out volatile sectors, showed an annual increase of 4.6 per cent. The seasonally adjusted measure rose 1.0 per cent between March and April.

Price of crude oil 

Month on month, the input prices measure of UK manufacturers' materials and fuels rose 2.6 per cent. This mainly reflected a rise in the price of crude oil. In seasonally adjusted terms the index rose 2.4 per cent between March and April.

The 'narrow' input prices measure rose 12.6 per cent in the year to April. In seasonally adjusted terms the index rose 2.2 per cent between March and April.

The figures were released by the Office for National Statistics on the day that the CBI reported that small and medium-sized manufacturers have sharply raised the prices of their goods to try to tackle the strongest cost pressures in over 20 years.

Adding to this difficult climate, demand for their goods has fallen both at home and abroad. Yet despite this, job numbers are growing in the sector, and the smallest firms have been particularly active in hiring new staff.

Raw material costs 

During the three months to April, 51 per cent of survey respondents said that their average unit costs had gone up, and 7 per cent said they had decreased.

The resulting balance of +43 per cent is the strongest in over 20 years, driven by much higher energy and raw material costs. SME manufacturers are now passing on these growing cost pressures to customers.

A balance of +20 per cent of firms raised domestic prices over the last three months, which is the strongest since April 1995 (+32 per cent), and a similar number expect to do so in the coming three months.

Export prices grew at a slower rate overall (a balance of +10 per cent), but were much stronger for medium sized firms (+23 per cent), who had expected a fall (-13 per cent).

The volume of export orders fell unexpectedly and despite the weaker pound, with a balance of 11 per cent reporting a drop.

Falling optimism 

Medium-sized firms were hit quite markedly, and bullish expectations of export growth were disappointed as orders fell at their fastest rate (-19 per cent) since April 2002 (-22 per cent).

The volume of output among SMEs flattened out from a balance of +10 per cent reporting growth in January, to +2 per cent. The outlook is more positive, as a net +7 per cent of firms predicts output will grow.

Optimism about the overall business situation has fallen again (to a balance of -20 per cent), and optimism about export prospects for the year ahead was lower for a net 10 per cent of firms.

Plans to invest in plant and machinery have weakened since January, while intentions to invest in buildings have improved slightly, but remain weak. 

Overall, SME manufacturers expanded their workforce over the past three months, but there was a stark difference between the smaller firms - where a balance of +12 per cent taking on more staff was the highest since April 1995 - and the medium-sized firms, where a net 8 per cent cut jobs.

Drop in export orders 

Russel Griggs, chairman of the CBI's SME Council, said that the uncertain wider economic climate had resulted in some mixed findings.

“What is certain is that small and medium-sized manufacturers are continuing to feel the impact of higher fuel and raw material costs, and that they are now having to pass these on to customers,” he added.

Griggs called the drop in export orders worrying, particularly for medium-sized firms, but pointed out that there were some more encouraging signs.

“Smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July," he concluded.

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Related links

• Office for National Statistics
• CBI