The price of goods leaving British factories rose at a record rate in April as the cost of raw materials soared, official figures show today, and denting hopes of a rate cut next month.

Output prices rose by 1.4 per cent during April, pushing the annual rate up to 7.5 per cent, the highest level ever recorded since the figures were first compiled by the Office of National Statistics in 1986.

The cost of raw materials also rose by a record level, increasing by 2.6 per cent month on month and 23.3 per cent year on year.

Core output price inflation, which excludes food, drink, tobacco and petrol, rose by 1 per cent in April, pushing the annual rate to 4.6 per cent, up from 3.4 per cent in March, and suggesting that more expensive energy and food are not solely to blame for the jump in prices.

Paul Dales at Capital Economics said that while the increases in producer prices may not filter though to consumers, with retailers absorbing the blow to their margins. The rate-setting Monetary Policy Committee (MPC) will be on high alert for such a possibility, which in turn will keep them unwilling to lower interest rates.

He said: "We think that the consumer slowdown will mean that retailers will be forced to absorb the bulk of these cost increases in their margins. Nonetheless, this data will maintain the MPC’s reluctance to cut interest rates any faster."

Howard Archer, of Global Insight, the economic consultancy said: "The April producer price data are truly horrible and very worrying indeed for the Bank of England. [This] raises serious questions as to whether the bank will be willing to cut interest rates from 5.00 per cent to 4.75 per cent as soon as June despite current signs that the economic downturn may be deepening and widening. "

The Consumer Price Inflation figure is due tomorrow and predicted to have risen to an annual rate of 2.6 per cent in April from 2.5 per cent in March.

The inflation headache shown in the producer prices figures was further aggravated by another steep rise in Britain's import bills, fuelled by recent steep falls in the pound.

Separate trade figures today showed that import prices for goods from abroad jumped by 1.9 per cent in March, to stand 10.3 per cent up on a year earlier. Import prices for goods excluding oil and erratic items were up by 5.8 per cent year on year over the first quarter - the biggest quarterly gain since 1995.

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