LONDON, Oct 9: British manufacturers’ raw material costs rose more than expected and at their sharpest rate in more than two years last month in a sign that inflationary pressures are still a danger.

Meanwhile, a bigger-than-expected rise in factory output in August confirmed recent surveys suggesting that British firms are still enjoying robust demand despite a strong pound.

The Office for National Statistics said that input prices rose 3.2 per cent in September, more than twice the rate forecast by analysts and the biggest rise since January 2005.

This took annual input price inflation up to 6.4 per cent from 0.7 per cent in August.

Output prices rose by 2.7 per cent year-on-year last month, slightly less than expected but still its fastest pace since March.

Financial markets showed little reaction to the data as most economists expect that official interest rates have peaked at 5.75 per cent because of the turmoil in global credit markets. Still, signs that price pressures are re-emerging might mean that borrowing costs are not about to come down yet.

“Generally these figures are a touch stronger than expected and there is nothing here that suggests the Bank of England will cut rates in November,” said George Buckley, chief UK economist at Deutsche Bank.

The chief culprit for the rise in input prices last month was an 8.1 per cent monthly rise in the cost of crude oil. Prices of home produced food materials rose by 3.1 per cent, mainly due to record wheat prices.

The ONS said wheat markets remained fuelled by concerns that supplies were inadequate. The price of bread and pasta has risen in many countries recently as manufacturers passed on the sharp rise in wheat prices.

—Reuters