Producer output price inflation falls

British factory gate inflation fell to a 5-year low in April as raw materials costs fell at their fastest annual rate in 7 years.

According to the Office for National Statistics (ONS), producer output price inflation fell to 1.2 percent in April from 2 percent in March, bringing it to its lowest since April 2004 and is a further indication that inflation is coming into line.

The fall in input prices was far greater than analysts had predicted and this has helped struggling manufacturers whilst the competitiveness of the current economic climate has meant that the savings have been passed onto the consumer.

The fall in the Consumer Prices Index inflation and reduced cost pressures means that savings will reach the high street quicker.

Cheaper commodity prices are now offsetting the higher import costs as a result of the weakness of the pound, according to Jonathan Loynes at Capital Economics.

Howard Archer, chief UK economist at IHS Global Insight, has said that the fall in fuel costs has helped dramatically and manufacturers are likely to continue to slash prices and utilise all spare capacity.

The latest figures are good news for struggling consumers and will hopefully help to fight off the threat of deflation.

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