UK wholesale prices sustained their fastest annual decline since records began last month as manufacturers passed on falling raw material prices to customers. The data is the latest evidence that inflationary pressures are easing, providing the Bank of England with scope for further cuts in interest rates.
National Statistics said output prices were down 0.6 per cent in October against the same month last year, the largest year-on-year drop in 43 years of monitoring and a fall of 0.1 per cent on the previous month when the prior record was set. Stripping out petrol prices, which have followed the oil price lower since the terrorist attacks of 11 September, output prices were flat against both the same period last year and the previous month.
Separately, raw material prices registered a 9 per cent year-on-year decline last month, their largest annual fall in three years after slipping 2.6 per cent on the previous month in their fifth consecutive monthly fall. The figures were in line with economists' predictions based on a 19 per cent decline in the oil price.
The oil price came off sharply yesterday as news broke of the crash of an airliner in New York. It was already weakening after Russia rejected a call by Opec for sizeable cuts in oil output. December crude oil futures fell as much as 92 cents, or 4.1 per cent, to $21.30 a barrel in New York.
Economists said the sharp decline in raw material prices implied output prices should be even lower, and that industry was using lower input prices to strengthen margins.
John Butler, UK economist at HSBC, said it was possible recent rises in the price of retail goods would fall back. "Over the past 12 years, every turning point in producer price inflation is reflected in a turning point in retail goods prices," he said. Simon Rubinsohn, chief economist at Gerrard, said the data was unlikely to have great sway over the Bank of England's Monetary Policy Committee but rising unemployment was likely to prompt further cuts.
Sir Edward George, the Governor of the Bank of England, said yesterday global growth would pick up over the course of 2002 although some countries, including the US, risked entering recession first.Reuse content