Producer input prices were expected to fall further, signalled by September's NAPM price index. However, a sharp 1.1% m/m jump, in addition to upward revisions to back data, contributed to a rise in annual growth from 9.2% to 9.5%. The rise in input costs mainly reflected an erratic move in food and oil prices and most economists believe September's data is a blip rather than a fundamental rise in inflationary pressures.
Output price inflation is also proving a little more stubborn than expected, and at 4.5% remains significantly higher than RPI growth.
Although last month's rise largely reflected increased pulp & paper prices, it is clear that substantial cost pressures remain in the price chain, and it may be a while before the benefits of lower global commodity prices are felt at the retail level. Disappointing RPI data for September added to the general gloom about domestic inflation. The headline series rose 0.5% m/m reflecting sharp rises in the price of clothing and footwear.
Remaining on the inflation theme, one positive aspect of September's survey was that those sectors experiencing the sharpest price rises have also seen the most significant drop in volumes. Further RPI growth will be constrained by such consumer resistance to higher prices.