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Producer price inflation hits 3.8%

The price of goods leaving the factory gate increase by an annual rate of 3.8% last month according to figures from the Office for National Statistics. This is the fastest increase seen for 13 months and will fuel fears that inflation could yet rear its ugly head and become a prominent barrier to any UK economic upturn.

Producer price inflation for December 2009 increased by 0.4% compared to the corresponding period in 2008 although much of this was due to the increase in the price of oil which ended the period in question over 70% higher than it began. Even though UK consumers are struggling to cover their bills and expenses at the moment, if producer price inflation continues to rise then at some point producers will need to pass on these additional expenses.

This will fuel inflation which will impact on business levels, profitability, disposable income and could ultimately derail the UK economic upturn. There are so many potential pitfalls which the UK economy could fall into over the next few months that the authorities will need to be extra careful and extra vigilant to avoid disaster. This will be a testing time for any government whether the current Labour government wins re-election or the Conservative party comes into office after a period in the wilderness.

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