Producer inflation eases

13-11-2006

Producer inflation eases
Factory gate inflation lessened in October, the government has revealed, owing largely to falling petrol prices.

The output price index for home sales of manufactured products fell 0.1 percentage points between September and October to give an annual increase of 1.7 per cent.

Today's figures from the Office for National Statistics show that the same index excluding food, beverages, tobacco and petrol went up 0.3 per cent in the same period for an annual rise of 2.5 per cent.

In the input price index for materials and fuels bought by manufacturing, October's like-for-like increase of 3.8 per cent represented a fall of 1.1 percentage points from the last month.

Howard Archer, chief UK and European analyst at Global Insight, said that today's official figures represented "welcome news".

But he added: "However, the Bank of England will be less enamoured to see that core output price inflation rose at an increased rate of 0.3 per cent month-on-month and 2.5 per cent year-on-year. This will do little to alleviate its concern that manufacturers are increasingly looking to raise their prices to restore their margins.

"The key determinants remain whether or not wage settlements move higher in the early 2007 pay rounds and the strength of the economy given the [Bank of England's] monetary policy committee's overall belief that there is only limited spare capacity."


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