Crash, what was that noise? Oh, it was just the ceiling caving in, inflation burst through it again?
Yesterday, the Office for National Statistics released its latest data on producer inflation, and it was, well, sit down, take a deep breath, and read on.
Here’s the bad news. Input prices, that’s what manufacturers fork out for the goods and services they buy in, shot up. The non-seasonally adjusted data for December showed an 11.3 per cent rise over last year, and a 0.5 percent jump on the month before.
It was the rising price of food and import goods that did it for the index – funnily enough oil had a negative impact in the month. All in all, it was the worst rate of input price inflation for 18 months.
And now brace yourself again, for here is the really bad news.
Output price inflation hit its highest level in 16 years, with non-seasonally adjusted output prices up 5 per cent on a year ago, and an even-more worrying 0.5 per cent on November.
Just because manufacturers are upping prices, it does not mean inflation will occur on the High Street. It all depends on how much of a hit retailers are prepared to take.
As Capital Economics pointed out, the relationship between core output price inflation and core goods CPI inflation has been fairly weak in recent years.
Even so, with the pound apparently on the way down, there are plenty of reasons for the Bank of England to tread with care when making its interest rate decisions this year.
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