Belfast Telegraph

Oil prices send factory gate inflation to a 28-month high

Surging oil and food prices last month sent annual factory gate inflation to its highest level since October 2008, official figures have revealed.

Office for National Statistics data on producer prices from the manufacturing industry revealed input costs rose by a further 1.1% between January and February, which pushed the annual rate to 5.3% - a 28-month high.

Output prices also rose at the fastest annual rate since October 2008, although the month-on-month increase more than halved to 0.5%.

Higher petrol costs were largely behind the increase, although the latest hike caused by the Middle East unrest is yet to show in the figures.

Economist Howard Archer of IHS Global Insight said the figures would heap further pressure on the Bank of England to raise interest rates to calm inflation.

He said: "The Bank of England will be desperately hoping that input costs will soon fall back and that manufacturers' ability to raise their prices will be limited by significant excess capacity."

But there was a glimmer of hope for Britain's above-target inflation as the significant slowdown in output prices shows manufacturers are still holding off from passing on the full extent of their input costs. Core output prices rose by 0.1%, taking the annual rate down to 3.1%.