Producer price figures for October raise further concerns about inflation prospects. "Core" output prices – i.e. excluding food, beverages, petroleum and tobacco – rose by 0.3% on the month following a 0.5% September gain, pushing annual growth to a six-month high of 2.0%.
Recent solid monthly increases are unusual for this time of year. The chart shows annual growth together with a three-month rate of change based on an attempt to adjust the raw numbers for seasonal variation. This latter series has surged to an annualised 7% – the highest since July last year.
This pick-up conflicts with the official and consensus view that large-scale excess capacity will pull core inflation lower, offsetting upward pressure from the weak exchange rate, rising commodity input costs and supply-chain disruptions due to insufficient working capital. Companies may be attempting to push through faster price increases under cover of the further fall in the pound since the summer and the coming hike in VAT.
