Raw material costs soar for manufacturers
Manufacturers saw the price of raw materials jump last month
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Monday, 08, Oct 2007 11:18
Raw material costs for manufacturers jumped sharply in September, driven by an increase in the price of crude oil.
Input prices rose by 3.2 per cent between August and September, the biggest rise since January 2005. On an annual basis raw material costs were up by 6.4 per cent, the data released by the Office for National Statistics (ONS) shows.
Analysts said the jump would heap pressure on manufacturers to raise their prices, adding to concerns that higher oil and food prices could drive consumer price inflation across the board.
However factory gate prices showed little change last month, with output prices edging up by just 0.1 per cent between August and September on an unadjusted basis.
The increase mainly reflected a rise in the price of food products, said the ONS, which revealed that output prices for home sales of manufactured goods rose by 2.7 per cent on an annual basis.
Meanwhile manufacturing production increased in August, after floundering in July, separate figures released by the ONS show.
Manufacturing output climbed by 0.4 per cent in the three months to August, while overall industrial production was up by just 0.1 per cent following drops in the output of the oil, gas and utilities industries.
Nonetheless analysts said the figures suggested the manufacturing sector was continuing to demonstrate its resilience in the wake of an ongoing credit crunch, higher interest rates, a strong pound and rising oil prices.
As such many economists believe it is unlikely the Bank of England will opt to cut interest rates in the near term, with monetary policymakers having opted to keep the benchmark rate of interest on hold at 5.75 per cent last week.
"Given still significant upside risks to the medium-term inflation outlook, we suspect that the Bank of England will only trim interest rates before the end of 2007 if it becomes clear that growth is taking a major hit, thereby diluting underling inflationary pressures," explained Global Insight chief economist Howard Archer.