British factory gate prices rose by more than expected in December to push the core output prices inflation rate to its highest level in more than seven years, official data showed this morning.
The Office for National Statistics (ONS) said producer-output prices rose an unadjusted 0.2 per cent on the month in December to stand 1.8 per cent higher than a year earlier, the highest rate since March. Analysts had predicted a 0.1 per cent monthly rise.
More worryingly for inflation prospects, however, the so-called core measure of output prices - which excludes the volatile components of food, drinks, tobacco and petroleum - rose by a seasonally adjusted 0.3 per cent on the month, the strongest increase since September 1995.
The annual rate of core factory gate inflation rose to 1.6 per cent from 1.4 per cent in November, the highest rate since June 1996.
The ONS said the rise in factory gate prices was driven by a surge in scrap metal and furniture prices. The former jumped by 7.7 per cent on the month.
Most analysts expect the Bank of England to raise interest rates next month to 4 per cent to keep inflation in check as the economy recovers.
But markets showed little reaction to the stronger-than-expected figures as they awaited figures on consumer prices next week for a clearer picture on whether the BoE would likely go ahead with another rise.