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."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea