The Producer Price Index (PPI) measures input and output prices for UK companies. In February, the headline rate of company input prices grew by 14.7 per cent in the year to February 2022. The largest contributor to input costs was crude oil, which was up 57.3 per cent, followed by metals and chemicals which both increased by roughly 18 per cent.
In the same month, UK CPI inflation was 6.2 per cent. As input costs prices are rising faster than consumer prices, on average, UK companies’ margins will be falling. However, just because margins are falling (in sum), that doesn’t mean all companies are incapable of protecting profits against this kind of inflationary backdrop. In short, businesses that have pricing power and aren’t energy intensive are best placed to maintain their profitability.
