Annual Output Inflation surges as pressure mounts on central bank
Written by admin on February 11th, 2008 in UK Business, UK Housing Market, UK economy.
A sixteen year high, that’s the level of inflation the UK is currently experiencing for goods leaving UK factories according to January’s report released by the Office for National Statistics.
Annual output inflation reached 5.7% in January up from 5% in December, with the price of goods leaving factories up 1% and prices paid by factories for raw materials also continuing to rise, now up 18.7% over the past 12 months.
According to ONS data the surge recorded in January is due to the further increasing prices of crude oil which is up 70.3% on the year, and the spiralling costs of home grown food up 36% - a record high.
Core output inflation which strips out the effects of both rising fuel and food prices, has also risen faster than expected, up 0.8% this month and 3.2% on the year.
The report will certainly be of concern to the monetary policy committee at the Bank of England, and could prevent any further planned rate cuts being made in a bid to stave off UK recession.
“We had been expecting a further increase in output price inflation, but these figures are unequivocally awful,” said Philip Shaw, economist at Investec. “The scale of worsening of factory gate inflation highlights the MPC’s dilemma with monetary policy over the remainder of the year. It is having to grapple simultaneously with a slowing economy and a worsening inflation background.”
This news comes at a time when comparable housing market data also show continued slowdown throughout January, a sign that the once lucrative property market is beginning to loose momentum. House prices rose 9.1% in January down from 9.7% in December.
Amid growing recession concern the ONS also released figures showing Britain’s trade deficit gap in December was £7.574bn, higher than the predicted figure of £7.35bn.
