A survey of more than 2,000 UK chief financial officers shows that businesses are expecting higher inflation pressures ahead, even as wage growth shows early signs of easing.
The Decision Maker Panel (DMP), conducted between 8 and 22 May, found that firms increased prices by 3.8% over the past year to May. However, expectations for the coming year point to further price increases, with businesses forecasting their own prices to rise by 4.0%, up from 3.8% in the previous survey.
At the same time, wage dynamics showed a slight cooling. Annual wage growth eased to 4.2% in the three months to May, down from 4.3% in the prior month. However, expectations for wage growth over the next year remained steady at 3.4%.
The survey suggests firms expect wage pressures to moderate further, with projected wage growth falling by 0.8 percentage points over the next 12 months.
Energy Shock Impact on Businesses
The Bank of England-backed survey also highlighted the continued impact of higher energy costs on corporate outlooks. Around 57% of firms expect to raise prices over the next year due to the energy shock, while 68% anticipate lower profit margins.
Businesses also expect broader economic effects, with many forecasting weaker sales and reduced employment compared to normal conditions, reflecting ongoing pressure on demand and profitability.
Inflation Outlook Remains Sticky
Overall, the findings suggest that while wage inflation may be gradually easing, firms still expect persistent price pressures ahead—an important signal for the Bank of England as it weighs the timing of future interest rate decisions.
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