The CBI warned today that the price of manufactured goods would rise steeply over the coming months, even as activity in the sector slows.
The highest balance of manufacturing firms since 1995 have told the CBI their products will get more expensive over the coming three months, as rising oil prices drive up costs.
At the same time though, manufacturers said their order books are 'below normal' and that they don't expect output to grow in the next quarter.
In the CBI's May Industrial Trends Survey, 21 per cent of firms rated their total order book as above normal and 31 per cent said it was below.
Firms also do not expect their volume of output to grow over the next three months but believe it will flatten out (a zero balance, the same as in April's survey).
Despite shrinking demand, 36 per cent of manufacturers expect they will put their prices up over the next quarter, compared to just 6 per cent who say they will fall.
The need to pass on these cost pressures is being felt most intensely among capital goods firms, like machinery and plant manufacturers.
The May 2008 CBI Industrial Trends Survey was conducted between April 24 and May 14 2008 and 543 manufacturing firms replied.