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UK Producer Prices Rise In January

Excluding tax hikes which were effective in January, producer price index was up 3.5 percent, the Office for National Statistics said.

LONDON (AP) -- U.K. producer prices rose 3.8 percent in the year through January, up from the 3.5 percent rate reported a month earlier, due to the rising cost of petroleum and manufactured products as well as tobacco and alcohol, the nation's statistics agency said Friday.

Excluding tax hikes which were effective in January, the producer price index -- which measures the cost of goods at the factory gate -- was up 3.5 percent, the Office for National Statistics said.

"January's further appreciable rise in producer prices maintains concern that consumer price inflation will not only spike up to 3.5 percent or higher in the near term but could also prove stickier than hoped thereafter," said Howard Archer, economist at IHS Global Insight.

The government's official target is to hold inflation at 2 percent or less.

The statistics agency said input prices for materials and fuels were up 8.4 percent in the year to January, partly reflecting the recovery of oil prices. The input price index rose 2 percent just between December and January.

The Bank of England expects consumer and producer prices to ease back down in coming months due to sluggish demand.

The weak state of the economy was evident in a separate report by the Insolvency Service, which said personal insolvencies in England and Wales reached a record high in 2009 and that company insolvencies were at the highest since 1993.

A total of 134,142 people went bankrupt or took out an Individual Voluntary Arrangement or Debt Relief Order during the year, the agency said. That topped the previous high of 107,288 in 2006.

There were 35,574 personal insolvencies in the fourth quarter, up 25 percent from a year earlier.

Company insolvencies totaled 19,077, the highest figure since 1993 but lower than the record of nearly 25,000 set in 1992.

The 4,566 company insolvencies in the fourth quarter was down 1.7 percent from the previous quarter and 1.1 percent below a year earlier.

If inflation again becomes a worry and the Bank of England raises its key rate from the current all-time low of 0.5 percent, personal insolvencies are likely to accelerate, said Alan Tomlinson, an insolvency specialist.

"For many people struggling with their debts, the final straw could come when interest rates rise," Tomlinson said. "Many people have survived this far into the recession because their mortgage payments have been lower, but once these go up they could be in trouble."

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