Call for rate cut as output prices fall to 38-year low

THE CITY yesterday warned the Bank of England to stand ready to cut UK interest rates again after producer price inflation hit a 38-year low and figures painted a dismal picture of activity in the high street.

Retail sales fell in October for only the second time since March 1995, according to the British Retail Consortium (BRC). Official data from the Office for National Statistics confirmed that prices continue to fall in manufacturing.

Neil Parker at Royal Bank of Scotland said: "The deflationary forces are building in the economy and will require further rate cuts at some point". David Coleman at CIBC Markets said: "Once again the latest reading on inflation at the factory gate level suggests there is little of it. All this bodes well for another easing of monetary policy."

October's BRC sales monitor revealed that like-for-like sales were 0.6 per cent lower than in the month last year. Mid-season price promotions continued through the month, the BRC said, and poor weather kept shoppers at home.

Ann Robinson, BRC director general, warned: "There is a paramount need to keep consumer confidence from collapsing if recession is to be avoided. We hope the MPC [the Monetary Policy Committee] will stand ready to make further cuts if confidence doesn't bounce back".

The ONS said producer output prices fell by 0.2 per cent in October, more than the City expected. This takes the year-on-year rise in output prices to just 0.1 per cent, the lowest since March 1960. Producer input prices also fell by 0.2 per cent.

Despite the weak economic data, Chancellor Gordon Brown defended his view that the economy was on course for a soft landing next year.

Giving evidence to MPs on the Treasury Select Committee, Mr Brown said his forecasts for the UK economy - of growth slowing to 1 to 1.5 per cent next year before rebounding in 2000 - were based on the best information available and in line with other leading forecasters.

The Chancellor is understood to have factored significant interest-rate cuts into his forecasts. Last week's bold move by the Bank of England - which cut rates by half a point - will help achieve his targets.

Mr Brown said yesterday that one reason why his growth forecasts were reasonable was that "monetary policy is more forward looking and able to react to what is happening all over the world". He said a rebound in world trade and continued growth in the European Union would help the UK reach his targets for growth in 2001 of between 2.75 per cent and 3.25 per cent of gross domestic product (GDP).

The Chancellor staunchly defended his projections for borrowing, and repeated that his "golden rule" - only borrow for investment - would not be broken over the course of the economic cycle.

His comments came as Sir Clive Thompson, president of the Confederation of British Industry (CBI), warned that the Government needed to "grasp the nettle" on public spending.

Speaking at the CBI southern regional dinner at Ascot, Sir Clive said: "We need to face up to some uncomfortable questions about priorities and affordability."

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Popes current and former won't be watching the football together
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
Mick Jagger performing at Glastonbury
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial