TimesOnLine

The price of goods leaving UK factories and the cost of raw materials both rose at their fastest annual rate for more than a year in January, official figures show.

Output prices rose by 0.4 per cent from December and 3.8 per cent compared with the same month the previous year, according to the Office for National Statistics (ONS). This was the fastest annual rise since December 2008.

The figures suggest that there may be stronger inflationary pressures on the economy than the Monetary Policy Committee had thought, and could raise concerns that the Bank of England will be forced to increase interest rates earlier than it would like.

The ONS added that, apart from food, textiles and metals, all other product groups recorded price increases in the month of January. Beer prices rose by 2.1 per cent compared with December.

Core output prices, which exclude food, beverages, tobacco and petroleum products, rose 0.3 per cent on the month for a slightly less than expected annual increase of 2.5 per cent.

The cost of Britain’s raw materials also rose by more than expected, at 2 per cent on the month and 8.4 per cent year-on-year, the ONS said. This was the fastest rate since October 2008.

The ONS attributed this increase largely to the rise in crude oil costs which has risen by 70 per cent in the year.

Howard Archer, chief UK and European economist of IHS Global Insight, said: 'January's further appreciable rise in producer prices maintains concern that consumer price inflation will not only spike up to 3.5 per cent or higher in the near term but could also prove stickier than hoped thereafter.

“Consequently, the data reinforces our suspicion that the Bank of England would prefer not to return to quantitative easing after February's pause unless the economy suffers a serious relapse in 2010.

'Even so, we still doubt that the Bank of England will raise interest rates before the fourth quarter of 2010 given likely ongoing uncertainties and concerns over the strength and sustainability of the recovery,' he added.