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UK Producer Input Prices Rise 6.9 Percent

Input prices for U.K. industries rose 6.9 percent last year, while output prices, the cost of goods at the factory gate, rose 3.5 percent for the year.

LONDON (AP) -- Input prices for U.K. industries rose 6.9 percent last year, driven by a 66 percent jump in the cost of crude oil, official statisticians said Friday.

Output prices -- the cost of goods at the factory gate -- rose 3.5 percent for the year, including a half percent rise in December, the Office for National Statistics said.

The sharp rise in oil prices came after a depressed market a year ago, when the global credit crisis hit hard. Oil traded at about $44 a barrel at the end of 2008, compared to nearly $80 as 2009 ended.

Analysts were divided on whether inflationary pressures were becoming a problem.

"Provided that oil prices do not rise significantly further, Producer Price Index inflation should be close to a peak and will get nowhere near the 10 percent rate for output price inflation seen back in the summer of 2008," said Jonathan Loynes, economist at Capital Economics.

In any case, it will take 12 to 18 months for the producer price hikes to feed through into the consumer prices, he said.

"Coupled with the effects of the vast amount of spare capacity in the economy, this process should help to bring core CPI inflation down quite sharply later this year and in 2011," Loynes said.

Howard Archer, economist at IHS Global Insight, was more concerned.

"December's sharper-than-expected rise in producer prices raises concern that consumer price inflation could spike up even more than the Bank of England expects over the early months of 2010, and could also prove stickier than expected thereafter," Archer said.

The Bank of England has shown no concern about the economy overheating. On Thursday, it kept its base interest rate at an all-time low of 0.5 percent.

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