U.K. output prices increased the least in a year in August as a drop in energy costs eased pressure on manufacturers’ margins.
Prices charged at factory gates rose 0.1 percent from July, when they gained a revised 0.3 percent, the Office for National Statistics said today in London. The increase is the smallest since September 2010 and matched the median forecast of 18 economists in a Bloomberg News survey. Input prices dropped 1.9 percent on the month, the most since April 2009.
A drop in raw material costs is easing pressure on manufacturers as a cooling global recovery limits their ability to charge customers more. The Bank of England maintained emergency stimulus for the economy yesterday, though inflation at more than double its 2 percent target has for now kept policy makers from buying more bonds in so-called quantitative easing to bolster growth.
“Commodity prices have been coming down so a fall in output prices would be a relief,” Victoria Cadman, an economist at Investec Securities in London, said before the report. “The downside risks to the economy and global headwinds may be enough for the bank to pull the trigger on more quantitative easing.”
Oil prices have dropped about 20 percent from their 2011 high in May, and wheat prices are down about 25 percent from their peak for this year in February.
The gain in monthly output prices was led by a 1 percent increase in chemicals and pharmaceuticals, the statistics office said. Prices for petroleum products fell 0.6 percent. From a year earlier, overall output prices rose 6.1 percent.
Energy Prices
The pound remained higher against the dollar after the data were published. It traded at $1.5988 as of 9:32 a.m. in London, up 0.2 percent from yesterday.
The drop in monthly input prices was led by a 5.9 percent decline in crude oil. On the year, raw-material costs increased 16.2 percent, down from 18.3 percent in July.
Core producer prices, which exclude costs of food, alcohol, tobacco and petroleum, rose 0.2 percent in August from the previous month, and were up 3.6 percent from a year earlier.
Birmingham, England-based IMI Plc (IMI), a maker of fluid controls and retail displays, said August 25 net income in the first half was little changed as it predicted “good progress” for the second half. The company said it has been able to raise prices even as global economic growth falters.
U.K. factory output barely grew in July, increasing just 0.1 percent from the previous month, adding to signs Britain’s recovery has lost momentum. Gauges of manufacturing, services and construction all declined in August and the Bank of England cut its 2011 growth forecast to 1.5 percent from 1.9 percent.
In a separate report today, the statistics office said the volume of construction output fell 2.8 percent in July from June and was down 3.3 percent on the year.
The central bank held the key interest rate at a record low of 0.5 percent yesterday, and its bond-purchase plan at 200 billion pounds ($320 billion).
To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
