Reflecting price rises of other manufactured, petroleum and chemical products, output prices rose 0.2% month-on-month in August, the same as in July, a report from the Office for National Statistics revealed. The expected growth rate was 0.3%. Price increases in oil and chemical products were partially offset by a drop in tobacco and alcohol product prices.
Annual decline in output prices was the smallest since May with prices falling 0.4% in August, smaller than July’s 1.3% annual drop and the 0.5% decrease expected by economists.
Core output price inflation that excludes food, beverages, tobacco and petroleum accelerated to 0.7% annually from just 0.1% recorded in July. At the same time, core monthly inflation halved to 0.2% from 0.4%. While, annual core inflation came in smaller than the 0.8% rise expected, monthly inflation matched economists’ expectations.
Input prices grew 2.2% on a monthly basis in August, reversing a 1.1% fall in July. Input prices increased more than the expected growth of 1%. August’s growth was the biggest since June 2008.
Meanwhile, the input price index for materials and fuels purchased by manufacturing industry slipped 7.5% in August from the prior year compared to a larger decline of 12.2% in July and a consensus forecast for a 8.4% drop.
The ONS is set to issue the CPI data for August on September 15. The rise is factory-gate prices suggest an upward pressure on consumer prices. Consumer prices are forecast to rise 0.3% month-on-month in August, after staying flat in July. Annual inflation is expected to slow to 1.6% from July’s 1.8%.
The Bank of England said in its latest quarterly Inflation Report that the CPI inflation is more likely to fall below 1% in autumn, requiring an open letter from the Governor to the Chancellor.
On September 10, the central bank had maintained its interest rate for the sixth consecutive month at 0.5% and also voted to continue the GBP 175 billion asset purchase programme using central bank reserves.
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