Inflation at UK factories hits two-and-a-half year high

Inflation at British factories hit its highest rate in more than two years in March, official figures showed, raising fears about the feed-through into the wider economy.

Factory gate prices – what manufacturers charge for their products – rose 5.4pc over the year, the steepest inflation rate since October 2008, said the Office for National Statistics. The month-on-month jump was 0.9pc, while economists had expected a 0.6pc leap.

The data will stoke concerns about spiralling prices in the UK, as the rise in factories’ output prices is likely to help push up the headline inflation rate, currently well over target at 4.4pc.

Manufacturers are raising their prices in response to the squeeze on their margins as the costs of their own materials and fuels climb higher.

Input prices rose 14.6pc in the year to March, just off the previous month’s 28-month high at 14.9pc, mostly reflecting the rising cost of crude oil. The leap was 3.7pc on the previous month.

Chris Williamson, chief economist at researchers Markit, said: “Worse may be yet to come, as oil prices have since hit a record high in sterling terms and supply chain disruptions from the Japanese earthquake could also drive up prices for certain highly sought-after components.” (read more)