Food and beverage producers see slowdown in cost increases

By Michelle Perrett

- Last updated on GMT

Lolay: 'Good news to start the year'
Lolay: 'Good news to start the year'

Related tags Inflation Finance Supply chain

Food and beverages producers saw the biggest slowdown in cost increases in January, according to the latest Lloyds Bank UK Recovery Tracker.

Food and beverage manufacturers registered a fall of just over 13 points to 73.2 on the Tracker’s Input Prices Index in January, versus December.  A reading above 50.0 on this index signals costs are rising, while a reading below 50.0 signals them falling. This is a change from October when food and drink manufacturers​ reported the sharpest month-on-month price increases. 

The tracker said supply chain improvements had helped every UK manufacturing sector, except household goods, record a weaker month-on-month rise in input prices in January.

The number of UK sectors monitored by the Tracker reporting rising output growth in January climbed to the highest number since October 2021. 

Cost Inflation

However, businesses continued to face significant cost inflation, which translated into a record uptick in selling prices among service sector firms, the tracker revealed. 

Concern over the Omicron variant and Plan B restrictions, which remained in place for the majority of January in England, hampered activity for consumer-facing businesses, Lloyds Bank revealed. 

Tourism and recreation, which includes pubs, hotels, restaurants and leisure facilities, continued to see output contract for a second month in a row. 

UK transportation, which includes airlines, hauliers and rail operators, fell for the first time in five months to register its weakest performance since August 2021. 

Diverging trends

The tracker said higher wages, energy bills and transport costs were evident as drivers of inflation across the entire UK economy in January. However, the latest Recovery Tracker pointed to diverging inflationary trends between manufacturers and services firms.

The UK Recovery Tracker pointed to further improvement in supply conditions in January, including private-sector material shortages falling to a ten-month low. These improvements helped every UK manufacturing sector, except household goods, to record a weaker month-on-month rise in input prices.

Although cost pressures remained intense, improved supply conditions helped UK manufacturers record the slowest rise in factory gate charges in eight months on the Tracker’s Prices Charged Index.

Increase in service sector input costs

By contrast, higher salary demands and energy prices contributed to the second-fastest increase in service sector input costs on record.  

“An increase in the number of sectors reporting output growth in January is good news to start the year,”​ said Jeavon Lolay, head of economics and market insight at Lloyds Bank Commercial Banking. 

The Lloyds Bank UK Recovery Tracker is compiled from responses to IHS Markit's UK manufacturing, services and construction PMI survey panels, covering more than 1,500 private sector companies. 




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