Overall producer prices were firmer than expected in May. Factory gate charges were up 0.4 percent on the month which, with base effects quite positive, was enough to lift the annual inflation rate by 0.4 percentage points to 2.9 percent, its highest posting so far in 2018 but still well short of the rates seen throughout 2017.
In fact, the monthly gain was anyway largely attributable to petroleum products which saw a 4.3 percent surge. Paper and printing alongside other manufactured products saw a 0.5 percent bounce but elsewhere prices were quite subdued. Consequently, the core output price index advanced only 0.2 percent for a 2.1 percent yearly rise, just a tick above April's downwardly revised mark.
Meantime, a sharp jump in oil lay behind a 2.8 percent monthly spurt in the cost raw materials and fuel. This lifted their annual growth rate from by fully 3.6 percentage points to 9.2 percent, the strongest reading since June last year. Crude oil was up 10.4 percent on the month, with base prices given an extra boost by a weaker pound. Imported metals (3.6 percent), imported parts and equipment (2.1 percent) and imported food (1.1 percent) were similarly lifted by the pound's decline.
Following news of a reasonably subdued May CPI (see today's calendar entry), the mid-quarter PPI update suggests that at least underlying pipeline inflation pressures have changed little since April. As such, the majority of members should again feel obliged to vote to keep policy on hold at next week's BoE MPC meeting.