Inflation hits manufacturing costs

(SHARECAST) – Input costs for manufacturers rose by their highest annual rate in more than two years in January, pointing to continuing inflationary pressures faced by the British economy.

Input prices were up by 13.4 percent in January from the same month last year, up from a rate of 12.9 percent in December 2010.

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. Data earlier this month from the British Retail Consortium showed that shop price inflation rose to 2.5 percent from 2.1 percent in December.

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

The bank's Monetary Policy Committee yesterday voted to keep rates at 0.5 percent, 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.