British Factories Face Rising Costs

Dec. 13, 2010
Increase due to higher prices for crude oil and fuels

Britain's manufacturers suffered higher costs for production materials last month, stoking concerns about mounting inflationary pressures, analysts said. Input prices rose 0.9% in November compared with October, the Office for National Statistics (ONS) said.

The large increase largely reflected higher prices for crude oil and fuels, according to the ONS.

On a 12-month basis, prices surged 9% last month compared with November 2009. That followed a hefty annual gain of 8.2% in October.

The ONS said output costs -- the price of goods leaving factories -- had slowed to 3.9% in November, compared with the same level last year. That followed a larger increase of 4% in October.

"November's UK producer input price figures suggest that cost pressures in the manufacturing sector are still building," said economist Samuel Tombs at the Capital Economics consultancy in London.

"The stronger-than-forecast figures will reinforce expectations that the Bank of England will keep policy on hold for some time to come, as the economic recovery is weak but inflationary pressures remain a concern." Britain awaits official inflation data for November to be published on Dec. 14. The Bank of England's central task is to try and keep annual British consumer price inflation close to a government-set target of 2%.

However British annual inflation hit a four-month high of 3.2% in October.

The Bank of England last week voted to keep its key interest rate at a record low 0.50%, as expectations that Britain's robust economic recovery will slow next year offsets the country's high rate of inflation.

BoE policymakers also decided to maintain the size of the central bank's stimulus program at 200 billion pounds (US$315 billion.)

Copyright Agence France-Presse, 2010

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