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U.K. Output Prices Rise More Than Forecast on Petroleum

U.K. Output Prices Rise More Than Forecast
A printed circuit board technician assembles a circuit board in the Naim Audio Ltd. workshop in Salisbury. Photographer: Matthew Lloyd/Bloomberg

Oct. 7 (Bloomberg) -- U.K. factory output prices rose more than economists forecast in September, led by petroleum products and electrical equipment, as firms sought to protect profit margins after a surge in raw material costs over the past year.

Prices charged at factory gates rose 0.3 percent from August, the Office for National Statistics said today in London. The median forecast of 18 economists in a Bloomberg News survey was for a 0.2 percent increase. Input prices rose 1.7 percent as crude oil costs climbed.

Manufacturers may find their scope to increase prices limited by a darkening economic outlook as Europe’s debt crisis intensifies, economists say. The Bank of England increased emergency stimulus for the economy yesterday, saying inflation will undershoot its 2 percent target in the medium term.

“While price pressures remain, there seems to be some evidence that they are easing a little,” said George Buckley, an economist at Deutsche Bank AG in London. “If you see a weakening in Europe it’s going to translate into one in the U.K.”

The pound was little changed after the report and was trading at $1.5509 as 9:50 a.m. in London, up 0.4 percent on the day.

Core producer prices, which exclude costs of food, alcohol, tobacco and petroleum, rose 0.3 percent in September from the previous month and were up 3.8 percent from a year earlier.

The main drivers behind output prices last month were petroleum products, which rose 0.7 percent, computer, electrical and optical equipment and as well as food and clothing.

Commodity Costs

Input prices were boosted by a 5.1 percent increase in the cost of crude oil. Pipeline price pressures may ease as commodity costs retreat amid concern the global economy is tipping back into recession. The Thomson Reuters/Jefferies CRB Index of 19 raw materials has fallen about 13 percent since the start of September.

Birmingham, England-based IMI Plc, a maker of fluid controls and retail displays, said said Aug. 25 net income in the first half rose to 100.9 million pounds from 99.3 million pounds, while sales advanced to 1.03 billion pounds, and predicted “good progress” for the second half as most customers retain a positive outlook and the order book holds up.

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