However, the balance of manufacturers saying prices will rise next quarter (+21%) is the joint-second highest since 1995, the CBI's November Industrial Trends survey reveals. The same figure as was recorded in March, it is slightly lower than May's 12-year high (+25%) and a return to the climate of strong price pressures that seemed to be easing off.

Twenty six per cent of firms foresee an increase in output in the coming quarter, but 17% expect a decline. The balance of +9% is the lowest for a year (November 2006, +5%), considerably lower than February's peak of +28%, but still above the levels of 2005.

All three manufacturing sub-sectors have seen a slowdown in expected output growth since the beginning of the year, but this has been less marked amongst producers of consumer goods. And this month a balance of +38% of these manufacturers also feel able to raise their prices, significantly higher than firms making capital or intermediate goods.

CBI Chief Economic Adviser Ian McCafferty said:

"Recent tightening of economic policy is starting to be felt and manufacturers are downgrading their expectations for future growth in their output.

"But despite this, firms are having to push up their prices to compensate for heavy cost burdens.

"Last month's quarterly survey recorded the highest expectation of input cost rises in 12 years. With oil at over $90 a barrel, up more than fifty per cent on a year ago, plus the pressure of other rising commodity costs, manufacturers operating on tight margins clearly feel they have little choice."