Oil costs drive up price of raw materials
Guardian Unlimited | The Guardian | Oil costs drive up price of raw materials
Mark Tran
Monday August 8, 2005
Higher oil prices helped push the cost of raw materials up at the fastest pace for at least 20 years during July, official figures showed today.
The Office for National Statistics (ONS) said producer input prices rose by a seasonally adjusted 1.8% last month, taking the annual rate to 13.4%. The annual rise, driven by surging oil prices, was more than the 12.2% consensus forecast.
Meanwhile, prices at the factory gate also rose more than had been expected as manufacturers began to pass on increased costs on to customers.
Output prices rose by 0.7% in July, bringing the annual rate of factory gate inflation up to 3% - much higher than the 2.4% forecast by analysts.
Oil, which today hit a new high of $62.87 (£35) a barrel, was the main reason for higher input and factory gate prices.
The ONS said the crude oil component of the input price index had risen by 57.2% in the year to July, the fastest annual rise since October 2000.
Analysts believed the rise in underlying inflationary pressures would cause concern at the Bank of England.
"With oil prices rising to new nominal highs in early August, this evidence of an increase in underlying inflationary pressures will reinforce belief that the Bank of England is unlikely to cut interest rates again, in the near future at least," Howard Archer, of the consultancy Global Insight, said.
"Meanwhile, the persistent squeeze on manufacturers' margins has worrying implications for investment and employment in the manufacturing sector."
The Bank's monetary policy committee last week cut interest rates for the first in two years amid worries that the consumer slowdown might be more serious than first thought. Borrowing costs were lowered by a quarter of a percentage point to 4.5%.
Some analysts believe the Bank will cut rates once more this year, and that they will come down to as low as 3.5% next year.
Mark Tran
Monday August 8, 2005
Higher oil prices helped push the cost of raw materials up at the fastest pace for at least 20 years during July, official figures showed today.
The Office for National Statistics (ONS) said producer input prices rose by a seasonally adjusted 1.8% last month, taking the annual rate to 13.4%. The annual rise, driven by surging oil prices, was more than the 12.2% consensus forecast.
Meanwhile, prices at the factory gate also rose more than had been expected as manufacturers began to pass on increased costs on to customers.
Output prices rose by 0.7% in July, bringing the annual rate of factory gate inflation up to 3% - much higher than the 2.4% forecast by analysts.
Oil, which today hit a new high of $62.87 (£35) a barrel, was the main reason for higher input and factory gate prices.
The ONS said the crude oil component of the input price index had risen by 57.2% in the year to July, the fastest annual rise since October 2000.
Analysts believed the rise in underlying inflationary pressures would cause concern at the Bank of England.
"With oil prices rising to new nominal highs in early August, this evidence of an increase in underlying inflationary pressures will reinforce belief that the Bank of England is unlikely to cut interest rates again, in the near future at least," Howard Archer, of the consultancy Global Insight, said.
"Meanwhile, the persistent squeeze on manufacturers' margins has worrying implications for investment and employment in the manufacturing sector."
The Bank's monetary policy committee last week cut interest rates for the first in two years amid worries that the consumer slowdown might be more serious than first thought. Borrowing costs were lowered by a quarter of a percentage point to 4.5%.
Some analysts believe the Bank will cut rates once more this year, and that they will come down to as low as 3.5% next year.
posted by Marcel at 7:05 AM
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