New figures released this morning indicate that British manufacturers' raw material costs surged by 2.5 per cent in April as crude oil prices hit record highs.
Factory gate inflation slowed slightly to an annual rate of 2.4 per cent, but that was only because duty changes in finance minister Gordon Brown's 2006 budget had a smaller upward impact than a year earlier.
Core output prices, which exclude food, drink, tobacco and petroleum and are not affected by excise duties, rose at their fastest pace in nine months, and may raise concern that higher costs are feeding through the supply chain.
The Office for National Statistics said that on an annual basis input prices rose by 15.7 per cent. Crude oil prices were the biggest upward factor.
But food prices also had a part to play as demand for poultry dropped noticeably because of fears over avian flu, leading to higher prices of other meats as consumers substituted away from chicken.
Output prices rose by an unadjusted 0.6 per cent on the month as budget tax increases in tobacco and alcohol came into effect. But the overall impact was lower than a year earlier, causing the annual rate to decline to 2.4 per cent per cent from 2.5 per cent. That was still higher than expected.
Core output prices rose by 0.4 per cent on the month and by 2.2 per cent on the year.