UK producer prices surge

Producer prices have climbed at the fastest annual pace since at least 1986 in April caused by the sharp rise in the cost of raw materials.

Compared to last year, the prices charged by factories rose 7.5 percent from a year earlier as released by the Office for National Statistics.

The higher prices of oil, food and import prices, drove producers raw material costs up by 2.6 percent month on month and by an overall 23.3 percent over the year which is a record high.

This is also the highest ever recorded in the 20 year history of this series, and the trend is likely to continue.

The Bank of England’s Governor, Mervyn King, said last month that commodity-price gains will continue to push inflation to the government’s 3 percent limit and that this will further make the balancing act between inflation and economic growth harder.

The increase in producer prices will further add weight to the argument that adding to the case that the Bank of England should moderate the pace of any further interest rate cuts.

The core producer prices, which exclude food, beverages, tobacco and petroleum, rose 4.6 percent in April from a year earlier which is the highest for over ten years.

Policy maker, David Blanchflower, says that consumer price gains may be short-lived as slower economic growth limits, will naturally limit businesses’ ability to pass the increased costs to the consumer.

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