Producer price inflation declines in UK

A new report from the Office for National Statistics, released on Monday, shows that costs to manufacturers dropped significantly in January. Seasonally adjusted input prices fell by 2 percent in January compared to Decembers prices. Non-seasonally adjusted prices were down 2.5 percent, for a total decline of manufacturers’ costs of 1.6 percent in the year ending in January.

The main factor in the drop in prices was a decline in the price for crude oil and fuel. Prices for petroleum products were down 11.4 percent in January. The fall in oil prices resulted not only from a reduced demand due to mild weather, but was also aided by a strengthening of sterling that brought down the cost of buying fuel, which is most often denominated in US dollars.

Meanwhile, factory gate prices were up 0.3 percent in January, down slightly from the 0.4 percent in the same month last year. That increase in output prices put annual output price inflation at 2.1 percent. The main contributors to the advance were said to be higher prices for manufactured goods such as tobacco and alcohol.

Consumer price inflation figures are scheduled to be released on Tuesday, but the Bank of England had access to the numbers when it made its decision to hold interest rates steady last week, indicating that they might show consumer inflation down in January.

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