Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

Manufacturing output weakest in eight months as interest rates take their toll

by August 18, 2023
August 18, 2023
Manufacturing output weakest in eight months as interest rates take their toll

Rising interest rates have begun to bite UK companies, with a majority of businesses reporting the weakest output levels in eight months, according to a survey.

A monthly business tracker, compiled by Lloyds, found that 13 of 14 sectors said they had suffered from falling new orders last month, citing high inflation and climbing borrowing costs as the reason for weaker output. “In the face of higher interest rates and still relatively rapid price rises, businesses and consumers are being more careful about how they spend their money,” Nikesh Sawjani, senior UK economist at Lloyds Bank, said.

“This suggests that interest rates are having their intended effect. Output in the private sector is only marginally expanding, and it’s clear that many businesses are downgrading their expectations for future output growth as they settle in for what they believe will be a period of price pressures that are stronger than hoped and may last for longer than previously anticipated.”

There is growing evidence that the rapid pace of interest rate rises is beginning to hit the economy, 18 months after the Bank of England first began tightening its ultra-loose monetary policy. Latest figures on the jobs market this week showed an unexpected rise in unemployment, falling employment and a narrowing in open jobs vacancies in response to higher rates.

Rising borrowing costs deter companies from investment and hiring and can eventually lead to an increase in the jobless rate. Consumers are also encouraged to save more and spend less when interest rates and inflation are high, helping drive down demand and inflation.

Lloyds’ tracker found that software services was the only sector of the economy that did not suffer from falling new orders, with the likes of chemicals manufacturing and car production and transport suffering some of the biggest monthly drops. Ten out of 14 sectors said overall production contracted last month.

Official figures released this week showed that headline consumer price inflation dropped from 7.9 per cent to 6.8 per cent last month, with energy costs driving down overall price growth. However, inflation in the service sector and food rose, suggesting that some parts of the economy were still raising prices.

The survey found that businesses think sticky inflation will hit their performance this year, because consumers will hunker down in the face of a prolonged cost of living squeeze. Other surveys have shown that companies are still raising costs to consumers in an attempt to rebuild margins eroded by high inflation and surging energy costs.

Scott Barton, managing director at Lloyds Bank, said: “A sustained softening of demand may lead businesses to adapt their pricing strategies in order to attract, and retain, customer spend, resulting in a more intense and competitive environment. However, firms will be wary of the increased pressure this could place on margins. It’s crucial that any changes to pricing strategies are accompanied by watertight cashflow.”

Financial markets expect the Bank of England to continue its aggressive monetary tightening by raising interest rates twice more this year, taking the base rate to a potential 6 per cent.

Read more:
Manufacturing output weakest in eight months as interest rates take their toll

0
FacebookTwitterGoogle +Pinterest
previous post
Wilko staff have grounds for hope, says GMB union as bidders circle
next post
Trump seeks to delay federal election case until April 2026

You may also like

myenergi secures £30m from HSBC UK to drive...

April 13, 2023

Richard Branson’s rocket firm Virgin Orbit files for...

April 4, 2023

UK on track for nationwide full-fibre broadband rollout...

March 22, 2025

UK borrowing pushed to new record amid energy...

January 24, 2023

Optimizing public transport with intelligent technology

November 29, 2023

RMT announces further national rail strikes

February 17, 2023

SMEs Brace! Brace! for rest of 2024 amid...

March 28, 2024

Economy shrank 0.2% in third quarter, putting UK...

November 11, 2022

Mortgage arrears up sharply with landlords hardest hit

November 9, 2023

UK firms are cutting ties with China amid...

July 31, 2022

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Gen Z workers turn back to office jobs to combat loneliness

      August 25, 2025
    • US jobs market faces ‘Trump slump’ as tariffs and cuts hit growth

      August 25, 2025
    • Royal Mail and DHL suspend US parcel deliveries as Trump tariffs take effect

      August 25, 2025
    • Farmers warn of crisis as poll shows 80% fear for survival and none back Labour

      August 25, 2025
    • TikTok cuts threaten hundreds of UK content moderator jobs amid AI shift

      August 25, 2025
    • Hospitality hit hardest as nearly 90,000 jobs lost after budget tax rises

      August 25, 2025

    Categories

    • Business (8,874)
    • Investing (2,235)
    • Politics (16,476)
    • Stocks (3,228)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved