European Economic News
11/6/2009 8:00 AM ET
(RTTNews) -
British input prices unexpectedly increased in October for the first time since February pointing towards possible inflationary pressures in the economy.
Input prices for materials and fuels purchased by manufacturers unexpectedly edged up 0.1% from the previous year, reversing a revised 6.2% fall in September, the Office for National Statistics reported on Friday. Input price inflation turned positive for the first time since February. The decline for September was revised from a 6.5% fall.
Following a revised 0.2% monthly fall in September, input prices climbed 2.6% in October, which was a 16-month high. Economists had expected just a 1.5% monthly growth. The latest increase mainly reflected a rise in the price of crude oil. In seasonally adjusted terms, the index rose 1.2% between September and October.
Output prices, which are prices charged by factories, climbed 1.7% on a yearly basis in October, much larger than the 0.4% growth seen in September. However, the growth rate was smaller than the 1.9% increase expected by economists.
The output price index rose 0.2% in October from September, mainly reflecting price rises in electrical products, transport equipment, alcohol and tobacco and petroleum products. Economists had forecast output prices to rise at a pace of 0.3% in October, following a 0.5% rise in September.
Core output price annual inflation that strips out the volatile food, beverages, tobacco and petroleum costs, stood 2% in October and the monthly increase in the index was 0.3%.
Yesterday, the Bank of England maintained its key interest rate at 0.5% and raised the size of its quantitative easing measures by GBP 25 billion to aid the ailing economy. The central bank said reflecting higher petrol price inflation and the reversal of last year's reduction in VAT, inflation is likely to rise sharply to above the 2% target in the near term. The latest quarterly Inflation Report that shows the Monetary Policy Committee's inflation and growth forecasts, is set to be released on November 11.
The ONS is slated to release the consumer price index data for October on November 17. In September, annual inflation had slowed to a five-year low of 1.1% and stood below the central bank's target for the fourth straight month.
by RTT Staff Writer
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