UK factory gate prices increase

Rising oil prices meant higher costs for manufacturers

Prices charged by manufacturers rose faster than expected in February, official figures have shown, as firms sought to cover rising costs.

The Office for National Statistics (ONS) said the price of goods leaving factory gates rose 0.4% on the month to stand 2.8% higher for the year.

Producer input prices rose 0.1% in February on higher oil costs, giving an annual increase of 10.7%.

Analysts said the figures indicated a further UK rate rise may be needed.

"Overall, these numbers support the view incorporated in the market that the next move in interest rates is up," said John Butler, an economist at HSBC.

Rate worries

The monthly rise in input prices was less than analysts had been expecting, but the output price rise was stronger than forecast.

"While this is a less disturbing report for the Bank of England than it might have been, it nevertheless keeps an interest rate hike in May very much on the cards," said Howard Archer, of Global Insight.

"Particularly worrying, input prices rose at their fastest rate for nearly a decade in February, and oil prices have since moved up significantly further to set new nominal record highs in March."

Mr Archer also noted that while input prices are rising, manufacturers are still not passing on the increases, implying their margins are being "significantly squeezed".