Factory gate inflation at lowest since 1968

THE ANNUAL rate of inflation at the factory gate eased to 3.4 per cent last month, the lowest rate since February 1968.

The July increase compares with 3.5 per cent in the 12 months to June and a peak of 6.3 per cent in May 1990. During July, prices at the factory gate almost steadied, registering a slight increase of 0.1 per cent.

Excluding usually volatile prices for food, drink and tobacco, factory gate inflation was just 2.8 per cent. Apart from May, when the rate stood at 2.6 per cent, this was the lowest rate since the late 1960s.

The Central Statistical Office said factory gate prices excluding food, drink and tobacco in the three months to July rose by only 0.7 per cent on the previous three months after adjustment for seasonal influences. During the same period, prices rose at an annualised rate of 2.7 per cent, down from 2.9 per cent in June.

The Treasury welcomed the figures, which it saw as evidence of a further reduction in price pressures.

Yesterday's figures also indicate that upward pressure on manufacturing prices could ease even further in the months ahead. Industry's raw material costs were unchanged during July after taking account of seasonal influences.

In the 12 months to July, raw material costs fell by 1.5 per cent, suggesting that manufacturing industry is now benefiting from the weak dollar and flat or falling commodity prices. The annual fall in July followed a similar decline in June and one of 1.3 per cent in May.

Kevin Gardiner, of Warburg Securities, said: 'With broadly flat unit labour costs in prospect and a pattern of falling input prices, manufacturers will be able to deliver lower prices and wider profit margins at the same time.'