Jump in input prices stirs inflation fears
Tuesday 14 February 1995
Firms also passed on more of their cost increases. Prices charged at the factory gate rose by far more than expected, taking their year-on- year rate of growth to the highest since last February.
The shock hit long-term gilts and the pound, which approached its 1994 low of 2.3710 against the mark. Shares fell, with the FT-SE 100 index closing 28.8 points lower at 3,081.1.
Prices paid by producers for inputs jumped 1.3 per cent last month, to a level 11.5 per cent higher than a year earlier, after adjustment for seasonal variations. The biggest cost increases came in industries dependent on commodities whose prices have risen sharply.
Prices paid for materials by the rubber and plastics industry were 20.4 per cent higher last month than a year earlier, while input prices rose 17.3 per cent in basic metals industries. Others suffering double-digit rises included food manufacturing, textiles, paper and publishing, and chemicals.
Although commodity prices have fallen recently, the drop has been small relative to their increase over the past year. Leo Doyle, an economist at Kleinwort Benson, said the pressure from commodity prices would continue to affect manufacturers for another few months.
Prices charged at the factory gate rose 0.9 per cent last month - or 0.5 per cent after seasonal adjustment. Their year-on-year rate of growth climbed to 3.4 per cent after being as low as 1.9 per cent last summer.
The biggest price rises were passed on by the same industries paying the biggest increases in materials costs - namely rubber, metals, textiles and chemicals.
Higher excise duties introduced in the Budget should have added 0.4 per cent to prices charged by producers, but the higher rates were not fully passed on. "Core" factory-gate prices, excluding food, drink and tobacco and thus the excise duties, also rose 0.5 per cent.
The clear evidence of a bulge of higher inflation working its way along the chain has focused attention on January's retail prices and retail sales figures, to be published on Wednesday. Both were stronger than expected in December.
The Confederation of British Industry's survey of retail and wholesale trade, published today, showed high-street trade was weaker than retailers expected, perhaps suggesting that price rises can still not be passed on to consumers. Alastair Eperon of the CBI said: "The survey suggests that on an underlying basis high-street trade is still growing only modestly."
Some economists said that even higher base rates were indicated. Kevin Darlington at Hoare Govett said: "We will require much higher interest rates to keep retail price inflation around 2.5 per cent. The Bank of England will have to have a lot of gumption to meet that target."
The Microsoft mogul told fans a few home truths during his Reddit AMA
- 1 Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Ball pool for adults opens in London
- 4 Baldness could soon be treated using stem cells, scientists hope
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Boris Johnson claims porn-obsessed Islamic jihadists are 'literally w*****s'
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Teenager brandishing fake gun taken down by police after demanding airtime on Netherlands' NOS TV station
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...