UK factory orders contract at fastest pace since 2020, CBI says

May 21 (Reuters) - British factory orders ​contracted this ⁠month at the fastest ​rate since September 2020 and expectations for selling prices surged, ​according ‌to a survey on Thursday that illustrated the dilemma ⁠facing the Bank of England.

The Confederation ⁠of British Industry's monthly ​balance of total new orders slid to -41 in May from -38 in April.

A gauge of expected selling prices ​rose ‌to its highest since February 2023.

"Against an increasingly uncertain global backdrop, the conflict in the Middle East is feeding through to higher energy costs and ​renewed supply chain disruption, adding another layer of challenges ‌for manufacturers, who are already grappling with weak demand," Cameron Martin, CBI senior ‌economist, said.

A separate survey of manufacturers published earlier on Thursday by S&P Global showed British firms reported ​a rush of orders - but the increase was largely due ‌to clients trying to get ahead of possible further price increases or supply chain problems linked to the ⁠Iran war.

The ⁠BoE is watching to see ‌whether it needs to raise interest rates to snuff out the ​inflationary ​pressures sparked by the Iran war energy ‌price shock or whether the hit to demand means any uptick in headline inflation proves short-lived. (Reporting by Andy Bruce Editing by William Schomberg)