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U.K. January Producer Prices Climb Faster Than Expected on Raw Materials

U.K. factory-output prices rose more than economists forecast in January, led by increased costs for alcohol, petroleum products and clothing.

The price of goods at factory gates climbed 0.5 percent from December, the fastest in nine months, the Office for National Statistics said today in London. The median forecast of 19 economists in a Bloomberg News survey was for a 0.1 percent gain. Raw material costs rose 0.5 percent.

Companies may find it hard to keep raising prices as the economy struggles to avoid slipping back into recession. The Bank of England, which yesterday pledged to pump an extra 50 billion pounds ($79 billion) into the ailing economy, expects consumer-price inflation to fall below its 2 percent target by the end of the year.

“There’s probably a bit of upside news here as far as the consumer-price inflation figures are concerned next week,” said David Tinsley, an economist at BNP Paribas in London. “Still, its relatively small news compared to the base effects that are falling out of the index” and consumer inflation “is going to continue to head downwards at a rapid pace.”

The pound rose as much as 0.2 percent to $1.5837 after the data were released. It was trading at $1.5837 as of 10 a.m. in London, up 0.1 percent on the day.

Core Prices

From a year earlier, producer prices rose 4.1 percent last month, down from 4.8 percent in December and the slowest annual pace since November 2010, the statistics office said.

In January from the previous month, prices rose in eight categories and fell in one -- metals, machinery and equipment.

Core producer prices, which exclude costs of food, alcohol, tobacco and petroleum, climbed by 0.3 percent on the month and 2.4 percent from a year earlier, the slowest annual increase in February 2010.

Input prices rose 7 percent in January from a year earlier, the statistics office said. That’s the slowest annual increase since November 2009.

The Bank of England will publish new economic growth and inflation forecasts next week. In November, it projected that consumer-price inflation will slow to 1.7 percent by the end of this year from 4.2 percent in December. Britain’s six largest energy suppliers have cut their tariffs in response to falling wholesale costs.

In a separate report, the statistics office said construction output fell 0.5 percent in the fourth quarter from the previous three months, as previously estimated in gross- domestic-product data released last month.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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