Date: Friday 06 Jul 2012
UK producer prices fell at an 0.4 per cent month-on-month rate in June (2.3 per cent year-on-year), according to the latest data from the Office for National Statistics. This is the largest monthly fall since November 2008, when the index fell 0.7 per cent.
The consensus estimate was for a decrease of -0.2 per cent (2.4 per cent year-on-year).
The main contributions to the fall in the price index were petroleum products (-3.3% month-on-month), chemical & pharmaceutical products and clothing, textile & leather products. These falls were slightly offset by a price rise in other manufactured products.
Core output prices meanwhile dropped at an 0.2% month-on-month pace (2.0% year-on-year), versus the flat reading expected.
Input prices diminished at a 2.2% month-on-month pace (2.1% year-on-year).
Commenting on today´s data economists at Barclays are saying that, "output price inflation has been easing more slowly, with the headline measure at 2.3% year-on-year and core output price inflation at 2.0%. Although the match between producer prices and consumer goods prices is not perfect, they share a common trend and inflation on both measures has fallen significantly in recent months. We think some of this decrease in goods price inflation, especially energy, has contributed to the sharper-than-expected fall in headline inflation this spring. We now expect CPI inflation to be close to the BoE's 2% target in the second half of this year, primarily as a result of the sharp fall in oil prices and following the postponement of the fuel duty increase that had been planned for August.
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