Factory gate input price rise piles on the pressure for interest rate increase
Today's (14 December) producer price data for the UK shows Britain's factories are facing surging raw material costs, up some 12.5% in the year to December. The underlying effect is that higher costs are being passed through to customers in many cases, with producers hiking their own prices by 2.9% over the year.
Commenting on the new data, Chris Williamson, chief economist at Markit said there was clearly a squeeze on manufacturers' profit margins and firms would feel pressure to pass further cost increases on in coming months, "especially as there seems to have been no let up in the rising price of many commodities in recent weeks".
He went on: "The PMI's (Purchasing Managers' Index) input price measure hit a 19-year record high at the end of last year and many commodity prices have continued to soar higher. All-time peaks have been seen for many food items and metals (including copper and many precious metals), and oil has edged closer to $100 per barrel.
"These data will therefore add to calls on the Bank of England to raise interest rates to cool inflationary pressures."
