Factory gate prices fall as fuel costs plunge

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A record plunge in fuel costs sent factory gate prices to their first annual fall in almost seven years during May, official figures showed today.

Manufacturers' output prices were 0.3 per cent lower than a year earlier last month for the first time since July 2002, the Office for National Statistics (ONS) said.



This was spurred on by the sharpest year-on-year fall in petrol prices since ONS records began in 1992 - a plunge of almost 20 per cent.



Input prices were also down 9.4 per cent in the year to May, which was the biggest rate of annual decrease since November 2001.



But signs of the recent spike in petrol prices were also displayed in the figures, which showed factory gate prices edging up 0.4 per cent between April and May due to a 2.9p average rise in petrol during the month.



Experts said the data showed cost pressures on manufacturers were easing - although the figures were helped by comparisons with even steeper rises a year earlier when oil was heading towards record levels.



Howard Archer, economist with IHS Global Insight, said: "We suspect that producer prices will be muted over the coming months.



"Although the rate of decline in manufacturing activity is currently slowing substantially, conditions remain difficult with increased spare capacity and a need to price competitively to gain business."



Despite a 0.8 per cent rise in the prices of other manufactured goods month-on-month, costs fell 5.2 per cent in the year to May - the biggest fall since 1998. Scrap metal prices also fell by a record 41% year-on-year.

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