Factory gate inflation in the U.K. rose to the highest level in two and a half years to close the first quarter, adding to concerns over quickening price growth the central bank’s hesitation to raise interest rates, according to The Daily Telegraph. On Friday, the Office for National Statistics reported that factory gate prices rose by 0.9% in March from the previous month, moving the year-over-year factory inflation to 5.4%, which is the steepest rate of inflation since October 2008. The monthly gain outpaced economists’ 0.6% forecast increase, and comes on the heels of the Bank of England’s decision to maintain interest rates at a record low.
The report showed that input prices surged by 14.6% in the year to March, barely easing from the 28-month high of 14.9% recorded the previous month, which largely reflects surging crude oil prices. Markit chief economist Chris Williamson said, “Worse may be yet to come, as oil prices have since hit a record high in sterling terms,” and also noted the disaster in Japan “could drive up prices.” The data also showed that manufacturers have started raising their own prices as surging input costs shrink profit margins.