Factory Input Inflation Up

LONDON (SHARECAST) – Input costs for manufacturers rose at their highest annual rate in more than two years last month, indicating the continuing inflationary pressures faced by the British economy.

Input prices were up by 13.4% in January from the same month last year, up from a rate of 12.9% the previous month.

The increase reflected higher prices for crude oil, metals and other imported materials.

A continuing stream of inflationary data has been giving the Bank of England a major headache in recent months. Shoppers are also feeling the pinch. Data earlier this month from the British Retail Consortium showed that shop price inflation rose to 2.5% from 2.1% in December.

While continuing worries over economic growth are seen as strengthening the case for the continuation of low interest rates, some policymakers at the Bank are becoming more worried about rising inflation.

The Bank’s nine-member Monetary Policy Committee (MPC) yesterday voted to keep rates at 0.5%, but it is likely that at least two members voted for a rate rise.

Rate setters voted 7-2 in favour of keeping borrowing unchanged when they met last month, though Martin Weale joined perennial hawk Andrew Sentance in calling for a quarter-point hike.