LONDON, (Reuters) – British manufacturing companies have fallen at their fastest rate since the outbreak of coronavirus. This is due to a drop in optimism and a jump in prices. The survey also shows signs that the economy may be slowing down because of inflation.

According to the Confederation of British Industry, its quarterly gauge of factory firm confidence plunged from -9% to -34% in January to January. This is the lowest level since April 2020.

Anna Leach (CBI deputy chief economist) said that manufacturing orders and production continued to rise, but at slower rates, and that the conflict in Ukraine was exacerbating COVID supply issues.

It was leading to increased costs and worries about the availability of raw materials, which is the largest increase in prices since the mid-1970s.

Leach explained that “It is no surprise that sentiment has declined sharply over three months” and that many manufacturers are now scaling down their investment plans.

The growth of output volumes in April slowed from +27% to +91%, still well above the long-term average +4%. New orders rose slower (+22%) than +38% during the same period in January.

According to firms, growth will slow even more over the next three-months.

With an average increase in costs of 87%, the net balance of all firms reporting increased revenues, this was up from 74% in January. The domestic prices rose at the fastest rate since October 1979 with an increase of +60%, compared to +40% in January.

A monthly CBI survey indicated that price pressures would ease over the next three months, while overall orders growth slows to +14% from +26% as of March.