Manufacturers under pressure from crude price

THE cost of goods leaving British factories will continue to rise as manufacturers tackle soaring oil costs, analysts warned on Friday, despite some signs of cooling inflation.

Official figures showed the annual rate of factory gate inflation had fallen back to a two-year low in March, supporting hopes that price pressures are easing as the Bank of England has predicted.

However, both output and input price inflation – what companies pay for their raw materials – slowed less than many economists had forecast, highlighting the risks that still exist.

Howard Archer, chief UK economist at IHS Global Insight, described the data as a “mixed bag”.

He said: “The recent rise back up in input prices primarily resulting from higher crude oil prices is exerting increasing pressure on manufacturers to raise their prices in order to protect their margins.”

Archer warned that “sticky inflation” would maintain the squeeze on consumers’ purchasing power and make it harder for the central bank to embark upon further quantitative easing, or money printing, to support the economic recovery.

David Kern, chief economist at the British Chambers of Commerce, said: “Increases in oil and food prices have reinforced concerns about the outlook for inflation, and although there are signs that these pressures are easing, the situation will remain uncertain for some time.”

Brent crude oil prices hovered above $120 a barrel on Friday.