The cost of goods leaving Britain's factories rose at its sharpest annual pace in more than eight years in September, as the price of oil and other commodities continued to surge.
Economists said the figures indicated that inflationary pressures were building in the supply chain and that showed it remained possible that the Bank of England (BoE) will increase interest rates once more this year.
The Office for National Statistics said today that producer output prices rose by 0.3 per cent last month after an upwardly revised 0.4 per cent increase in August, taking the annual rate to 3.1 per cent, its highest since April 1996.
Short sterling interest rate futures immediately fell as analysts had predicted a 2.8 per cent year-on-year rise.
Raw material costs shot up 1.3 per cent in September, and were up 7.4 per cent on the year, the fastest increase since November 2000.
The BoE held interest rates steady at 4.75 per cent last week for the second month in a row and a growing number of analysts predict that borrowing costs have already peaked as five rises since November have succeeded in slowing the economy down.
The housing market, in particular, appears to have turned and to be cooling. Separate government figures today showed house prices were up 13.6 per cent on the year in August, down from 14.3 per cent in July.