UK service sector facing mounting cost pressures

The ONS have developed, on an experimental basis, a price series tracking services producer prices. As the name suggests, this series captures the cost pressures confronting firms in the service sector.

Recent movements in the series tell an interesting story. First, prior to the crisis, the service sector was facing mounting inflationary pressures. Second, once the crisis took hold, prices came crashing down. Third, in 2010 cost pressures have again emerged.

The services producer price inflation rate is far lower than that facing the manufacturing sector. There, the recent surge in energy and commodity prices has been a major driver of higher producer price inflation.

Nevertheless, the sudden reappearance of inflation in the service sector is further evidence that pricing pressures are building in the UK.