Belfast Telegraph

Manufacturers' margins squeezed by 'nasty' 9% spike in input costs

Manufacturers faced mounting cost pressures last month after UK figures showed a higher-than-expected leap in input prices.

The Office for National Statistics (ONS) said input costs for manufacturers spiked to 9% year-on-year in November, up from 8.2% the month before, while the month-on-month increase was 0.9%.

November's rise was more than expected and shows a "nasty" squeeze on margins, according to IHS Global Insight economist Howard Archer.

Output price growth - revealed last week separately from the input figures, which were delayed due to concerns over potential errors - slowed to 3.9% year-on-year in November from 4% in October confirming that input costs were rising faster than output.

Mr Archer said: "This will maintain pressure on manufacturing companies to try and raise their output prices further in the near term.

"While companies have been able to pass on some of their higher input costs due to the decent bounce back in manufacturing activity in 2010, they have nevertheless had to absorb a fair proportion of the increase in costs."

Input prices were pushed higher by rising crude oil and fuel costs, while imported food materials also lifted, although this was partially offset by a fall in home-produced food.

Experts said the pressure was unlikely to ease any time soon, as oil prices have surged from $85 to $90 a barrel in recent weeks.

Manufacturers may try to pass on more of their costs, but could be hampered if the recovery slows as expected over the year ahead.