Factory prices in line with inflation trend

FRESH evidence that UK inflationary pressures remain subdued, and a further fall in consumer confidence, yesterday boosted hopes of another quarter- point cut in base rates to 5 per cent, writes Peter Torday.

Factory gate prices rose just 0.1 per cent in March, after adjustment for seasonal influences, driving down factory gate inflation to 2.7 per cent in the year to March from 3.4 per cent the previous month. Excluding volatile prices for food, drink, tobacco and petrol, factory gate inflation was unchanged at 2.5 per cent in the year to March.

On that basis, prices rose at an annual rate of 0.8 per cent in the latest three months over the previous three-month period - the lowest figure since 1973.

Yesterday's producer price figures contained less bullish news on industry's raw material costs. After seasonal adjustment, raw material costs rose by 0.5 per cent leaving costs in the year to March 2.6 per cent lower than a year earlier. Excluding materials and fuel purchased for the food, drink, tobacco and petroleum processing industries, prices were 0.5 per cent lower than a year earlier.

A consumer survey by Gallup for the European Commission showed that the balance of pessimists over optimists regarding their household finances fell to minus 30 per cent in April compared with minus 25 per cent in March. This is almost level with the all-time low of minus 31 per cent reached in March 1990.

The Engineering Employers Federation meanwhile has warned that a further 40,000 engineering jobs will go over the next year despite a gradual recovery in the industry.

The federation's latest Engineering Economic Trends show total engineering output will rise by 3 per cent by the middle of 1995 from the second half of last year.