Factory gate inflation at 10%

11-08-2008

Factory gate inflation at 10%
Factory gate inflation rose over ten per cent in July, while costs of goods entering factories rose by 30.1 per cent.

Data from the Office for National Statistics (ONS) show annual output price inflation hit 10.2 per cent last month – up from ten per cent in June – to the highest rate since February 1982.

A monthly rise of 0.4 per cent was recorded, mainly reflecting rises in petroleum and chemical products.

Input price annual inflation fell from 30.8 per cent in June to 30.1 per cent in July, although a 21.2 per cent rise in the cost of imported materials was recorded – mainly due to high oil prices.

Over the month, input prices fell 0.6 per cent.

Howard Archer at Global Insight, claimed the figures show "some very modest relief" on the inflation front.

"The recent sharp retreat in oil and commodity prices later on in the month clearly started to feed through in the overall July input data and it should show up far more in the August data," he said.

"It seems therefore that the year-on-year rise in input prices peaked at 30.8 per cent in June."

He added the Bank of England would probably be "modestly relieved overall with the July producer price inflation data".

"But the Bank is very far from out of the inflation woods yet, with consumer price inflation still likely to near 5.0 per cent later this year," Mr Archer said.

"Consequently, we still suspect that the Bank of England will be reluctant to cut interest rates until early-2009 despite the fact that the economy now seems more likely than not to contract over the second half of this year."

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