UK factory gate prices rose in July at their fastest rate since records began 20 years ago but the rise was tempered with an easing in the rate of inflation for raw materials.
The Office for National Statistics said output prices, measured on an unadjusted basis rose by 0.4 per cent from June and jumped by 10.2 per cent from a year earlier, the highest annual rate since comparable records began in 1986. In June prices were up 0.9 per cent on the month for an annual rise of 10 per cent.
The increase during July was driven by petroleum products, basic chemical products and metal structures, which all posted their highest annual price rises since 1986 when the figures were first collated. Petroleum costs contributed exactly a third of the 10.2 per cent rise – up 35.2 per cent year-on-year, according to the ONS data.
Food inflation also played a significant role, weighing in with nearly a fifth of the rise, and hitting 11.6 per cent last month.
Other big rises came from tobacco and alcohol products, 7.2 per cent up on the year, and metal products, which rose 5.6 per cent.
Analysts had forecast a month-on-month increase of 0.6 per cent for an annual rise of 10.3 per cent.
Core output prices, which exclude food, beverages, tobacco and petroleum, also posted their highest annual increase since records began, rising by 6.6 per cent on a seasonally adjusted basis, up from 6.5 per cent in June.
Compared with June, core output prices rose by 0.3 per cent.
Meanwhile input prices eased slightly from the record increase seen during June.
The ONS said the fall in input prices was partly due to a fall in fuel prices, although crude oil and chemical prices were higher month-on-month.
On a seasonally adjusted basis prices fell 0.6 per cent from June, the largest fall since January 2007. However, the rate of annual inflation came in at a massive 30.1 per cent, just off the record high of 30.8 per cent seen in June.
In June prices rose 30.8 per cent on the year, revised up from the previous estimate of 30, and by 2.7 per cent on the month, revised from the previous figure of 2.1 per cent.
The annual rate for input price inflation has been rising steadily since July 2007, when it was just 0.6 per cent. Analysts had forecast a month-on-month increase of 1.1 per cent for an annual gain of 30.6 per cent.
Paul Dales at Capital Economics said the figures suggested that inflationary price pressure “may be close to a peak”.
“Admittedly, producers’ raw material costs are still rising at extremely rapid rates,” he said. “But the recent sharp falls in oil, wholesale gas and food prices suggest that price pressure right at the start of the inflation pipeline may be close to a peak.”
He added that while policymakers at the Bank of England would still be on guard for signs that the rises in pipeline prices were feeding into the high street for some months yet, “there is at last some light at the end of the inflation tunnel”.
However, analysts still expect headline consumer price inflation to spike to more than double the Bank of England’s two per cent target when July’s figures are published today and then remain elevated for some time to come.