Oil fuels factories inflation leap
SPIRALLING oil prices drove factory gate inflation to its highest in more than seven years in May, official figures showed today.
Manufacturers' output prices rose 0.3% during the month to stand 2.4% higher than a year ago - the fastest pace of increase since November 1996.
The increase came as raw material costs rose 1.6% due to a 13.6% leap in the price of crude oil. Input prices were 5.2% higher than a year earlier.
Economists said the outlook for inflation remains benign, despite the latest oil-related jump. They noted manufacturers' failure to pass on all of the cost increase in the form of higher prices.
John Butler at HSBC said: 'The key thing is that the rise in price pressure is coming simply from oil. If you strip out this, hopefully temporary, factor there's little sign of any significant underlying inflation pressure building up.'
