Manufacturing output and house sales down

UK manufacturing output declined for a fifth straight month in July, official figures showed, underscoring the weak state of the UK economy. The Office for National Statistics said that manufacturing fell by 0.2% between June and July, more than the 0.1% analysts had expected. Economists said that the figures were further evidence that the UK economy was likely to enter a recession. (BBC link)

The slump in the UK property market continued in August, with some estate agents selling fewer than one home per week in the past three months. The Royal Institution of Chartered Surveyors (Rics) said sales were at their lowest level since its monthly survey started in 1978. It said the fall in prices slowed, for the fourth month in a row, but they were still much lower than a year ago. Rics said the continued shortage of mortgage funds was "stifling" buyers. (BBC Link)

Further evidence of 'cost push' inflationary pressure.

A Confederation of British Industry (CBI) survey shows that manufacturers are raising prices as they face the strongest cost pressures in over 20 years.The CBI said that small and medium firms were struggling with high energy and raw material prices. However, there is some good news as the survey said that despite the prospect of higher costs, manufacturers were taking on new staff. The reasons appear to be that some firms are benefiting from the weaker pound and strong growth in Asia. At the moment price rises were affecting other businesses and had yet to transfer to consumers. Details here.

This was reinforced by further figures published by the government. The price of goods leaving Britain's factories rose at the fastest level in more than 20 years last month as soaring food and fuel bills pushed up the cost of production. In a fresh inflation warning to the Bank of England, the Office for National Statistics said so-called factory gate prices were up by 1.4% in April and by 7.5% over the past 12 months. Both were the highest since the series began in 1986. Read the article.

What factors will determine the ease to which firms can pass cost increases into consumers in the form of higher prices?