Factory gate inflation hits new low

FACTORY gate inflation fell to a new 24-year low yesterday, reflecting the inability of businesses to raise their prices significantly in the face of depressed consumer spending, writes Robert Chote.

Prices for manufactured goods rose by 0.1 per cent between July and August to a level 3.3 per cent higher than a year earlier, according to the Central Statistical Office. This was the lowest rate of output price inflation since February 1968 and down from 3.4 per cent in July.

The figures are in line with Confederation of British Industry surveys, which have shown growing numbers of companies expecting to cut their prices to revive demand for their goods.

Excluding food, drink and tobacco prices, manufactured output prices rose by 0.2 per cent between July and August, adjusting for normal seasonal changes.

The underlying annual rate of factory gate inflation on this measure fell to 2.6 per cent last month, down from 2.8 per cent in July. This was the lowest rate since May 1969. The easing in manufacturers' price increases has been helped by falls in the prices of fuel and raw materials, which fell 1.9 per cent between July and August and are 1.9 per cent down on a year earlier.