Factory gate prices hit eight-month high

British factory gate prices rose at their fastest rate for eight months in May, figures showed today.

The increase came as manufacturers looked to pass on the record cost of petrol to their customers.

The Office for National Statistics said output prices in May rose by 0.3% compared with the previous month, and have risen by 3.0% annually - faster than analysts had predicted.

Most of the increase was because of the rise in the cost of petrol, now at its highest since records began in 1991, but there was also some pick-up in core inflation, the ONS said.

Input prices - the cost of the raw materials bought by manufacturers - fell by 0.5% last month, the first decline since December 2004, as the price of crude oil fell by 3.2%.

The Bank of England's monetary policy committee could be concerned that the figures show manufacturers can pass on some of their costs to customers, which could push up inflation.

"The higher producer price output inflation will not go down well with the Bank of England, and may well heighten belief among the more hawkish members of the MPC that the case is growing for an early hike in interest rates," Howard Archer, an analyst at the consultancy Global Insight, said.

Last week, the MPC held the cost of borrowing unchanged at 4.5% for the tenth month running. Many experts believe interest rates could rise early next year.