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."

News
news

Emergency call 'started off dumb, but got pretty serious'

News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Arts and Entertainment
JK Rowling is releasing a new Harry Potter story about Dolores Umbridge
arts + entsJK Rowling to publish new story set in wizard's world for Halloween
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites those Star Wars rumours
PROMOTED VIDEO
News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
people

Thought you'd seen it all after the Jeremy Paxman interview?

Arts and Entertainment
On The Apprentice, “serious” left the room many moons ago and yet still we watch
tv

Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent

Life and Style
tech

Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into conflicts
Arts and Entertainment
A scene from David Ayer's 'Fury'
film

"History is violent," says the US Army tank commander Don "Wardaddy" Collier

News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
football

Striker's four-month ban for biting an opponent expires on Friday

News
news
News
peopleFox presenter gives her less than favourable view of women in politics
News
George Clooney and Amal Alamuddin married in Venice yesterday
peopleAmal and George Clooney 'planning third celebration in England'
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

CTO / Chief Technology Officer

£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker