The cost of goods leaving British factories continued to rise in February as petrol, food and alcohol prices pushed the annual increase to its highest level in over two years.
The data will do little to ease pressure on the Bank of England to raise interest rates to curb inflation - currently double the official 2 per cent target. Yesterday, the Bank of England held the cost of borrowing at a historic low of 0.5 per cent but market analysts are forecasting an increase in April or May.
The Office for National Statistics said producer output prices rose by 0.5 per cent between January and February, below the previous alarming monthly spike of 1.1 per cent but the annual rate increased to 5.3 per cent, the largest since October 2008.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The further jump in producer input prices in February is worrying news and will keep pressure on manufacturers to raise their prices to protect their margins
The cost that UK factories paid for materials and fuel increased by 14.6 per cent, which equated to a 1.1 per cent rise on month, reflecting the increased cost of crude oil.
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The data showed that food products produced in the UK cost 6.1 per cent more in February compared with last year, while chemicals and pharmaceuticals gained 6.8 per cent. The cost of petroleum products increased by 17.5 per cent on year. The input price of crude oil was a third higher, while imported metals cost almost 28 per cent more than in February 2010.
Oil is currently trading at $114 a barrel and Mr Archer said: “High input prices are likely to maintain pressure on manufacturers to raise their output prices in the near term at least.
“The Bank of England will be desperately hoping that input costs will soon fall back and that manufacturers’ ability to raise their prices will be limited by significant excess capacity. Likely slowing expansion may well curb manufacturers’ pricing power further out.”