The first-quarter British Chambers of Commerce survey supports the assessment here that recent strong growth has exhausted spare capacity and is starting to put upward pressure on inflation, implying a significant probability that the Bank of England will be forced to raise official rates before year-end.
The percentage of services firms operating at full capacity rose further last quarter, to the second highest level in the survey’s 25-year history – see first chart. The manufacturing percentage fell slightly but is also near the top of its historical range.
The percentage of services firms planning to raise prices rose for a third quarter to its highest since the first quarter of 2011 – second chart. The manufacturing percentage declined, probably reflecting recent sterling strength, but remains above average.
In other news today, industrial output rose by a stronger-than-expected 0.9% in February, further increasing the probability that the preliminary estimate of first-quarter GDP growth released later this month will exceed the Bank of England’s 0.8% assumption in the February Inflation Report – see previous post.
