A survey has shown that British factory activity accelerated at its fastest pace in two and a half years last month as firms hiked prices at their sharpest rate since records began eight years ago.
The pick-up in prices will make uncomfortable reading for the Bank of England, which has already raised interest rates by 0.75 points since last August to cool inflation.
The CIPS/RBS Purchasing Managers Index rose to 55.4 in February from 53.2 in January, marking the strongest growth in the manufacturing sector since July 2004. Analysts had expected a reading of 53.
The survey showed the pound's continued strength failed to dent demand for British goods, with export orders expanding at their fastest rate in more than three years, and boosting total orders growth to its highest since July 2004.
Policymakers will be alarmed by news that the prices charged by firms rose at their fastest rate since CIPS started polling for that information in November 1999, even though growth in raw material costs eased in the month. The output prices index jumped to 56.9 in February from 54.2 in January, while the input prices index eased to 60.8 from 61.7.
Employment growth hit its fastest pace in nearly two years.
