British factory gate inflation dropped to its lowest in more than a year in January as input costs also rose at a much slower pace, data showed on Friday.
Output price inflation fell to 4.1 percent from 4.8 percent in December, its lowest annual level since November 2010, but the drop was smaller than economists had forecast, highlighting the risk that consumer price inflation may not fall as fast this year as the Bank of England is predicting.
The Office for National Statistics said producer output prices ticked up 0.5 percent on the month compared to December as prices of alcohol, fuel and clothes rose. Economists had expected only a 0.1 percent monthly rise and an annual rate of 3.7 percent.
Input price inflation slowed to 7.0 percent, down from a upwardly revised 8.9 percent in December and the lowest annual rate since November 2009. However, economists had expected a bigger dip in the year-on-year rate to 6.7 percent.
The Bank of England forecast that consumer price inflation will tumble early this year from the current rate of 4.2 percent and dip below its 2 percent target towards the end of 2012.
Some policymakers have flagged the risk that a renewed spike in oil prices could keep overall inflation up, and January's data showed that a price rise in crude oil was the main driver behind the 0.5 percent month-on-month increase in input prices.
The central bank voted on Thursday to pump an extra 50 billion pounds into the economy to shore up a renascent recovery and shield Britain from any spillover from the unresolved euro zone crisis.
Separate ONS construction data confirmed that the sector shrank by 0.5 percent in the fourth quarter, when the overall economy also contracted.