Forex

LONDON (Thomson Financial) - There was further evidence of rising pipeline inflationary pressures in the UK, with figures showing raw materials again increasing sharply in February and manufacturers continuing to pass on these cost rises into their prices.

The news will do nothing to alleviate the Bank of England's concerns about inflation and will continue to make it difficult for rate-setters to prop up economic growth by cutting interest rates.

The Office for National Statistics revealed that input prices jumped by 1.7 pct in February from January on a seasonally adjusted basis following January's massive 2.6 pct rise and above forecasts for a slightly smaller 1.5 pct gain.

On an annual basis, input prices surged by 19.3 pct, the largest annual increase since records began in 1986.

On a non-seasonally adjusted basis, input prices rose by 19.4 pct, below forecasts for 18.2 pct and again the highest increase on record.

The rise in the input price index during February mainly reflected increases in the prices of crude oil, metals and other imported parts, the ONS said.

Core input prices -- which exclude food, beverages, tobacco and petroleum -- were up 0.9 pct from January and 8.1 pct on the year, the highest rate since July 2006.

Meanwhile output prices -- which are monitored by the Bank of England as a signal of pipeline inflation -- continued to suggest that manufacturers are increasingly passing the jump in raw materials costs into their prices.

On an unadjusted basis, output prices rose a monthly 0.3 pct in February after a 1.0 pct increase in January, though this was below analysts' forecasts for a 0.5 pct rise.

The rise was caused by increases in manufactured products, tobacco and alcohol and food products.

On a year-on-year basis, output prices were 5.7 pct higher, unchanged from January and keeping the annual rate at its highest level since July 1991. Analysts had forecast a slightly bigger 5.9 pct rise.

The figures also showed that output price inflation excluding food, beverages, tobacco and petroleum also increased during February.

The core measure of output prices rose by 3.0 pct on a seasonally-adjusted year-on-year basis in February, against forecasts for 3.2. This follows an upwardly revised 3.2 pct increase in January.

On a monthly basis, core output prices were up by 0.2 pct after a 0.9 pct rise in January, below forecasts for a 0.4 pct rise.

The figures highlight the dilemma facing the Bank of England. Rate-setters will have little opportunity to cut interest rates to revive a flagging economy while prices surge higher.