ClickAJob News

Factory gate prices rose modestly in August, prompting further speculation that interest rates may have peaked.

So-called output prices, unadjusted for seasonal shifts, rose by 0.1 per cent between July and August, according to new data released by the Office for National Statistics (ONS) today.

On an annual basis output prices rose by 2.5 per cent over the year to August, broadly in line with growth that had been predicted by analysts.

Core output price inflation, which excludes volatile food, fuel, tobacco and alcohol prices, was also up by 0.2 per cent over the month and by 2.4 per cent over the year.

The modest rise in the price of manufactured goods was accompanied by a bigger-than-expected fall in producers' costs.

Factories paid 0.5 per cent less for imported raw materials in the period between July and August, on a seasonally adjusted basis.

The fall mainly reflected a drop in the price of crude oil, the ONS stressed.

Analysts said the figures suggested that inflationary pressures in the manufacturing industry appear to be easing and would fuel predictions that interest rates may now have peaked.

The Bank of England last week announced its decision to keep interest rates on hold at 5.75 per cent, but in a statement expressed concern that indicators of pricing pressures remain "somewhat elevated".

Amid continuing output growth, monetary policymakers have been concerned that manufacturers could raise charges for their products, thus fuelling consumer price inflation.

Investec economist Philip Shaw said that output price inflation would probably need to moderate further in the medium term in order to ensure that the Bank's target, of keeping inflation below two per cent, was met.

But he added: "The bigger picture remains that UK rates have peaked."