Manufacturing industry experiences rise in input costs

News Article - 18 February 2011
Category: Industry

The cost of raw materials and fuel to UK manufacturers increased at an annual rate of 13.4 per cent last month, according to the Office for National Statistics (ONS).

The demand for industry commodities has led to a spike in costs, fuelling fears of rising inflation and interest rates. While production in the UK's small manufacturing industry improved in the last quarter, a 28.8 per cent increase in the price of crude oil has been blamed for the biggest year-on-year input price rise since 2008.

Analysts warn that if manufacturers transfer pricing concerns onto consumers, the national economy and inflation rate could suffer. The Bank of England's governor, Mervyn King recently indicated that inflation could reach five per cent before falling in 2012.

The central bank is now fielding questions from worried industry experts who suggest economic recovery may have stalled.

David Kern, chief economist at the British Chambers of Commerce, said: "We accept that interest rates will probably need to rise later this year. But it is important for the monetary policy committee to wait until the initial impact of the austerity measures has been absorbed. At the current time, we should be concentrating on growth-supporting policies and ensuring the recovery is sustained."

The Bank of England is due to publish its latest quarterly forecasts for inflation and growth this week and figures from the ONS are expected to show that consumer inflation rose above four per cent in January - double the central bank's target rate.

Inflation has recently been driven by external factors of which the Bank of England has no control, with the implementation of 20 per cent VAT and the rising price of crude oil two of the main culprits.

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Access manufacturing and production management systems can help overcome complex manufacturing and assembly issues such as over and under-stocking and capacity planning. By increasing control over key issues that can effect cash flow firms are more able to emerge strongly in times of economic uncertainty.

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Article keywords: Raw materials, UK manufacturers, Office for National Statistics, ONS, commodity prices, manufacturing industry, inflation rate, Bank of England, Mervyn King, David Kern, British Chambers of Commerce, interest rates, monetary policy committee, multi-level manufacturing and production, Access manufacturing and production management systems, complex manufacturing and assembly, capacity planning

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