UK producer prices increase faster than predicted

Fastest rise in factory output prices for 9 months.

The latest figures from the Office of National Statistics (ONS) released on Friday morning have shown that UK producer prices rose 0.5 per cent for the year to January 2012. It represents the largest increase in a single month since April, with increased petrol, alcohol and clothing prices said to be the cause. The figure is higher than the expected 0.4 per cent increase.

Output inflation rates were down from 4.8 per cent in December to 4.1 per cent, their lowest annual rate since 2010, providing some relief to businesses hit by raw material price increases.

However, the drop in output inflation was not as significant as economists had hoped for, with fears now growing that producer price inflation could start to put pressure on the wider economy.

A separate report released by the ONS has revealed that the construction sector contracted by 0.5 per cent during the final 3 months of 2011 when compared with the previous quarter.