British manufacturing companies' raw materials costs rose at their fastest rate in 20 years in June as the price of crude oil surged, statistics showed today.
The Office for National Statistics said producer input prices rose a seasonally adjusted 2.1 per cent last month, compared with analysts' expectations of a 1.9 per cent increase.
That took the annual rate of input price inflation to 12.1 per cent - the fastest rate since March 1985. The chief reason for the rise was a 13.1 per cent jump in the cost of crude oil which has been trading around $60 a barrel.
This was 51.3 per cent higher than a year earlier, the fastest rise since October 2004.
Although Bank of England policymakers have been concerned about the upside risk to inflation posed by rising import prices, they are likely to take heart from news that so far manufacturers seem unable to pass on rapidly increasing costs.
Output prices fell an unadjusted 0.2 per cent in June, bringing the annual rate of factory gate inflation to 2.4 per cent from 2.7 per cent in May and much weaker than the 2.8 per cent forecast by analysts.
Coming alongside news that house price inflation slowed to just 6 per cent in May, the figures did little to alter expectations that the Bank of England would cut interest rates from their current 4.75 per cent soon.