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Recovery hopes grow as manufacturers up prices
11.09.09
Prices are again rising at the factory gate, sparking hopes of renewed economic recovery but also raising the spectre of inflation and tighter profit margins for business.
The Office for National Statistics today said manufacturers put up prices to customers by 0.2% month-on-month in August.
However, that was more than offset by the rising oil price helping send input costs soaring at the fastest monthly rate in more than a year, up by 2.2%.
"UK producers opted to absorb the unexpectedly sharp rise in costs in July, resulting in lower margins," said Richard McGuire at RBC Capital Markets.
Howard Archer at Global Insight said: "If input prices continue to rise, they will increasingly squeeze manufacturers' margins and this could have adverse consequences for employment and investment."
While the figures will fuel the notion Britain may come out of recession by the end of the year, economists are unsure what the rising prices could do for the economy and whether this should yet start bothering the Bank of England's interest rate-setting monetary policy committee.
