Annual input price inflation for British manufacturers turned positive in October for the first time since February, driven by a rebound in crude oil prices, official data showed today.
The Office for National Statistics said input prices rose 0.1 per cent on the year after a 6.2 per cent annual fall in September, confounding analysts' expectation for a decline of 1.3 per cent.
Factory gate inflation also picked up, but here the rise was no more than expected. Producer output prices rose 1.7 per cent on the year in October, up from 0.4 per cent in September and the highest reading since March.
"The eye-catching figure is the big jump in input prices," said Philip Shaw, chief economist at Investec. "The report as a whole is a reminder that there is an issue with imported costs coming into the UK, particularly commodity-based price pressures."
The figures suggest rising commodity prices and the weakening of the pound are leading to pressures at the start of the inflation pipeline. However, it remains to be seen to what extent producers will be able to pass on higher input costs while the economy remains weak.
The Bank of England expanded its quantitative easing programme by £25 billion yesterday, halving the pace of its asset purchases over the next three months.
The central bank said it expected consumer price inflation to pick up sharply in the near term. The medium-term outlook is more murky and analysts will pay close attention to updated quarterly growth and inflation forecasts from the BoE next week.
The pick-up in input price inflation was driven by a 0.8 per cent annual rise in crude oil prices, the biggest increase since October 2008.
Reuters