Manufacturers' costs soar

Manufacturers' raw materials costs rose almost twice as fast as expected last month propelled by higher wheat prices, taking the annual rate well above expectations, official data showed.

The Office for National Statistics said producer input prices rose 0.7 per cent on the month in September, taking the annual rate up to 9.5 per cent from 8.7 per cent in August. That was well above analysts' expectations for a rise of 0.4 per cent on the month and an annual rate of 8.6 per cent.

Annual output price inflation eased less than expected to 4.4 per cent from 4.7 per cent in August.

The figures are likely to disappoint Bank of England policymakers at a time when consumer price inflation is still running more than a full percentage point above its two per cent target.

The ONS said higher cereals prices helped push up the annual rate of home produced materials input price inflation to 9.9 per cent, its highest since October 2008.

Wheat prices have risen strongly in the summer as a result of a drought in major producer Russia.

Crude oil input prices fell slightly on the month but still exerted strong upward pressure on the annual rate.

The Office for National Statistics said PPI would from next month would be reclassified to be based on the 2007 style of industrial classification. As a result, the "recovered secondary raw materials" and "publishing" components will no longer be included in the manufacturing sector and will be classified under services.