A strong rise in oil prices pushed British manufacturers' raw material costs up more than expected last month and at their sharpest annual rate since October 2008, official data showed today.
The Office for National Statistics said producer input prices jumped 2 per cent in January to stand 8.4 per cent higher than a year ago, well above expectations for a 6.3 per cent annual rise.
Factory gate inflation also rose more than expected. Output prices rose 0.4 per cent on the month and 3.8 per cent on the year, the highest annual rate since December 2008.
A resurgence of price pressures in recent months has already pushed consumer price inflation almost a percentage point above the Bank of England's 2 per cent target.
Policymakers have said they will look through short-term price volatility and that spare capacity created by the recession will bear down on inflation over the medium term.
However, many economists reckon the central bank may be forced to nudge up its inflation forecasts when it publishes updated quarterly forecasts next week.
"It looks as though some of those inflation headwinds are greater than the BoE imagined," said Peter Dixon, an economist at Commerzbank.
The main upward pressure on input prices came from a 70.6 per cent annual jump in crude oil prices - the highest increase since July 2008.
"Factory gate inflation is well above its long-term average which means that the outlook for goods price inflation at the consumer level may prove a little bit challenging," said Philip Shaw, an economist at Investec.
Analysts had predicted an annual gain of 3.7 per cent for output prices.
There, the main upward pressure came from petroleum products, scrap metal prices and alcohol and tobacco. Beer prices rose by 2.1 per cent on the month.
Core output prices, which exclude food, beverages, tobacco and petroleum products, rose 0.3 per cent on the month for a slightly less than expected annual rise of 2.5 per cent.
Reuters