Home Business NewsEconomic News Producer prices rise in January

Producer prices rise in January

by LLB Editor
10th Feb 12 3:23 pm

Producer prices in the UK went up by 0.5 per cent between December and January, mainly due to higher prices on clothes, petrol and alcohol, it has been revealed.

The prices manufacturers charge went up by 0.5 per cent compared to the previous month, which is slightly more than economists had forecast. The monthly rise was the biggest increase seen since April last year, mainly due to hikes in clothing, fuel and alcohol prices.

However, output inflation in the year to January 2012 was 4.1 per cent, down from 4.8 per cent in December, according to the Office for National Statistics (ONS). This is the lowest the annual rate has been since November 2010.

The slow-than-expected easing of producer price inflation was labelled as significant by some economists.

Scotia Capital economist Alan Clarke said the Bank of England may have underestimated how high consumer price inflation will be in future months. He said: “This latest sign of stickiness reaffirms my feeling that consumer price inflation will prove higher than most, including the Bank of England, expect.”

Meanwhile, Markit economist Chris Williamson felt the rising cost of fuel could see the Bank’s predictions of a sharp fall in inflation land wide of the mark.

Williamson said: “With Brent crude at $119 per barrel, up almost 10 per cent so far this year, the rising cost of oil could confound the Bank of England’s expectations of consumer inflation falling as sharply as currently forecast in 2012.”

The higher crude oil prices have been reflected in a bigger-than-forecast rise in manufacturers’ input prices on the month.

But other economists were less concerned about the figures. Producer prices can take a little time to affect the prices paid by consumers at the tills, and are often inconsistent in how they map out. They can also fluctuate each month.

BNP Paribas economist David Tinsley said: “It’s relatively small news compared to the base effects that are falling out of the index in coming months.

“So the annual rate of CPI inflation is going to continue to head downwards at a rapid pace.”

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