Factory gate prices up by 4.1%

FACTORY gate prices rose by 4.1 per cent in the year to July, the highest rate for almost two years and evidence that manufacturers may be rebuilding profit margins after the recession, writes Peter Torday.

Rises in industry's raw material costs meanwhile fell to 6.6 per cent in the 12 months to July, from 7 per cent in the year to June and compared with a post-devaluation peak of 7.9 per cent in March. There were few indications in the monthly figures of revived inflation pressures. With raw material prices edging back from the highs reached after sterling's depreciation on Black Wednesday and unit wage costs continuing to fall, analysts expect the Bank of England report on inflation today to be relatively optimistic, a factor that may revive speculation over a cut in bank base rates.

Last month factory gate prices rose by 0.1 per cent. After volatile prices for food, drink, tobacco and petroleum are excluded, prices increased by 0.3 per cent after adjustment for seasonal influences and were 2.5 per cent higher than a year earlier, a rate unchanged from June. Measured on this basis, factory gate prices rose at an annual rate of 3.1 per cent in the latest three months, also unchanged from June but up from the post-devaluation trough of 1.6 per cent last December.

Industry's raw material costs fell 0.9 per cent in July. On a seasonally adjusted basis, raw materials prices were unchanged during the month.