The cost of goods leaving British factories surged last month by the highest annual rate since 1986 because of higher prices for chemicals, metal and petroleum products, official data showed on Monday.
Producer prices soared by a record 10.2 percent last month compared with 12 months earlier, Britain’s Office for National Statistics (ONS) said in a statement.
That was the highest since records began in 1986 and compared with a 10 percent jump the previous month.
PHOTO: BLOOMBERG
On a monthly basis, the ONS added that producer prices climbed by 0.4 percent last month from June amid record high oil prices.
However, both readings were lower than market expectations, which had been for an annual increase of 10.3 percent and a monthly gain of 0.5 percent.
World oil prices had struck record heights above US$147 per barrel on July 11, but have since fallen heavily on fears about slowing global economic growth.
“The producer price data provide some very modest relief on the inflation front, with the rise in output prices being modestly below expectations and input prices falling,” said Global Insight economist Howard Archer.
Input costs, or the cost of raw materials, for producers eased 0.6 percent last month compared with the previous month.
But they surged 30.1 percent last month, compared with 12 months earlier. That was not far off the record 30.8 percent increase that was seen in June.
Last week, the Bank of England (BoE) froze British interest rates at 5.0 percent for the fourth month in a row as it mulled slowing economic growth and high inflation.
The expected decision came as the BoE’s rate-setting monetary policy committee (MPC) faces a dilemma between cutting short-term rates to boost growth or lifting them to keep rising inflation in check.
“While pipeline price pressures in the UK economy remain very strong, there is some tentative evidence that they may be close to a peak,” Capital Economics analyst Paul Dales said.
“For the first time in 10 months, producers’ raw material costs fell in July” from the previous month, he said.
“The MPC will remain on guard for signs that the sharp rises in pipeline price pressures seen over the last year are feeding through into inflation on the high street for some months yet, [but] there does at last seem to be some light emerging at the end of the inflation tunnel,” he said.
The UK’s 12-month consumer price inflation rate spiked to 3.8 percent in June, almost twice the BoE’s official target of 2.0 percent.
Consumer price inflation data for last month was due for publication yesterday.
Analysts warn that inflation could spike to 5.0 percent in the coming months because of recent steep price increases in domestic gas and electricity suppliers.
“The Bank of England will probably be modestly relieved overall with the July producer price inflation data, but it is very far from out of the inflation woods yet, with consumer price inflation still likely to near 5.0 percent later this year,” Archer said.
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