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Fuel costs push up UK input prices

(SHARECAST) – The Office for National Statistics (ONS) has finally published input prices for November after leaving them out of Friday’s producer prices report due to potential problems with the data.

Input prices jumped 0.9 percent month-on-month and nine percent year-on-year last month, slightly more than expected, though upward revisions to the back data are thought to have been behind the larger yearly increase.

A hike in the price of crude oil and fuel caused much of the monthly surge, partially offset by a decline in the cost of home-produced food products.

UK petrol prices have gushed to an all-time high, the AA said last week, up to 121.76p per litre for petrol as the wholesale cost has risen sharply.

Margins were squeezed at manufacturing companies as the 0.6 percent monthly rise in input prices and annual increase of 7 percent easily beat the 0.3 percent and 3.9 percent rises in output prices – the amount charged for goods leaving the UK’s factories.

Howard Archer, chief UK economist at IHS Global Insight, said the numbers were “certainly nasty” but not markedly worse than expected. The delay had sparked concerns of a major spike up.

“While companies have been able to pass on some of their higher input costs due to the decent bounceback in manufacturing activity in 2010, they have nevertheless had to absorb a fair proportion of the increase in costs,” Archer said.

“We suspect that going forward, manufacturers will find it increasingly difficult to raise their prices, given likely slower expansion and significant excess capacity. The Bank of England will certainly be hoping that this is the case.”

 

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