Fuel pushes wholesale inflation to 2.5-year high

The Producer Price Index showed that input prices - the amount paid for materials and fuel by United Kingdom manufacturers - saw its highest rate of growth since4 September 2008, rising 20.5% in January.

If confirmed in data due March 1, it would mark the first time since April 2012 that the index has hit the central bank's 2 percent goal, after modest global growth and lower oil prices held down inflation for much of the past five years.

Higher oil prices across the globe led the rise, causing the price of fuel to increase.

The pound's sharp fall since the Brexit vote has made imports to the United Kingdom more expensive and oil prices have been rising on the back of lower production. While rising demand and higher commodity costs are reviving price pressures in the production pipeline, renewed strength in the dollar may pose a headwind. Going forward, according to the Bank of England, inflation could reach 2.7 percent within 12 months, as the UK's exit from the European Union is bound to make imported products costlier.

CARE economist Madan Sabnavis said " The wholesale price index (WPI) based inflation rate for the month of January 2016 came at 11 month high of 5.25% compared to 3.39% in the previous month.

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Inflation pressure remains, however, as the price paid for raw materials by United Kingdom manufacturers jumped 20.5% on the year, the fastest annual pace since September 2008.

Rural retail inflation was at 3.36 per cent in January compared with 3.83 per cent preceding month. On the other hand, upward pressures were partially offset by clothing and footwear prices. The rise in producer prices comes as manufacturers are reporting paying more for raw materials.

However, core inflation which reflects non-food, non-fuel items increased substantially, the highest in the last two years and 4 months.

The National Institute of Social and Economic Research said GDP grew by 0.7 per cent over the three months to the end of January, following growth of 0.6 per cent for the last quarter of 2016.

By this measure, prices rose only 0.2 percent in January, up a tenth of a point from December but matching November's increase.

  • Ronnie Bowen