Factory gate prices 'leapfrog'

Last Modified: 12 May 2008
Source: PA News

Factory gate prices surged at their fastest pace since records began more than 20 years ago during April, official figures have shown.

Soaring petrol costs, Budget tax hikes on alcohol and tobacco as well as rising steel scrap prices pushed up output prices 1.4% between March and April, according to the Office for National Statistics (ONS).

This is the highest monthly increase since records began in 1986 - likely to fuel inflation concerns among Bank of England policymakers and jolt hopes of interest rate cuts.

The price hikes lifted the annual rate of increase to 7.5% in the 12 months to April - also a record - as surging food product costs added to the pressure.

Most economists expect rates to fall to 4.75% next month, but the gloomy figures add to fears that the Bank's hands will be tied by its inflation-watching mandate.

Howard Archer, chief UK economist with Global Insight, said: "This raises serious questions as to whether the Bank will be willing to cut interest rates as soon as June despite current signs that the economic downturn may be deepening and widening."

Manufacturers' input costs rose more than 23% in the 12 months to April, the ONS figures showed. This is also the highest annual rate of increase since records began.

Crude oil - which peaked above 126 US dollars a barrel last Friday - rose 6.4% during April with attacks on oil pipelines in Nigeria keeping prices high.

Other increases adding to the pressure on manufacturers included a 6.2% hike in imported iron and steel prices, a 2.2% rise in chemical costs, and more expensive parts and accessories for cars.

The concerns over rising prices come at a time when recent surveys and figures have offered mounting evidence of a slowdown in the manufacturing and services sectors.

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