ClickAJob News

Factory gate inflation jumped to a 12-year-high in October as higher energy prices took their toll on production costs, new data has shown.

Output prices, the amount manufacturers charge when they sell their products, climbed at an annual rate of 3.8 per cent last month – the highest rate of growth since December 1995.

Analysts say the data, released by the Office for National Statistics (ONS), make an imminent interest rate cut unlikely.

Last week the Bank of England announced its decision to keep the UK's benchmark interest rate on hold at 5.75 per cent, with economists stressing that the move was likely to have been made in light of the desire by the monetary policy committee (MPC) to keep inflation in check.

Confirmation that factory gate prices are rising rapidly, thus adding to inflationary pressures, is likely to concern the committee's members ahead of the publication of the Bank of England's latest quarterly inflation report this week.

The ONS data revealed that on a monthly basis output prices for all manufactured goods rose by 0.6 per cent in October, reflecting rises in the cost of petrol, food and chemical products.

Rising input prices, or raw material costs, accompanied the increase in factory gate prices.

Input costs rose by a seasonally adjusted 1.8 per cent between September and October, giving an annual increase of 8.5 per cent – the fastest year-on-year rate since July 2006.

The ONS said the rise in the cost of raw materials mainly reflected increases in the cost of crude oil and fuels.

Economists say the figures mean it is now increasingly improbable that the Bank of England will cut interest rates in the short-term, despite monetary policymakers coming under increasing pressure to reduce the benchmark cost of borrowing in response to growing fears about a possible economic downturn.

"The data will reinforce concerns that elevated oil and food prices will feed through to push up consumer price inflation over the coming months," explained Global Insight chief economist Howard Archer, who predicted that a rate cut was unlikely until February next year.