Monday, December 10, 2007

UK producer prices hit a 16 year high

From the London Times......

Fears for the ability of the Bank of England to continue cutting interest rates grew today after factory gate inflation leapt to a 16-year high.

The 0.5 per cent rise in output prices in November took inflation on the producer price index (PPI), an early indicator of price pressures, to 4.5 per cent, the highest level since August 1991.

The Office for National Statistics said that the increase was driven by soaring food and energy prices. Food product prices were up by 6.6 per cent over the year, the strongest such figure since June 1993, in large part because of the soaring cost of domestically produced potatoes following a weak harvest.

Energy prices also climbed, spurred higher by a 9.8 per cent increase in the oil price over the month. The annual rise in petrol products' cost hit 18.5 per cent, the strongest for more than seven years.

While financial markets have been in turmoil since August, posing a risk to growth that last week led the Bank of England's Monetary Policy Committee (MPC) to cut interest rates by a quarter-point, producer price inflation has climbed steadily upwards, adding weight to calls for caution by the MPC's hawks.