Manufacturers are experiencing a welcome fall in input prices, official ONS figures have revealed: decreasing inflation has been identified as a contributing factor.
In August, input prices for manufacturers fell by 1.9% compared to just 5% in July. While the news is encouraging, the prices that manufacturers charged their customers only increased by 0.1%, while in the month before it was 0.3%. One of the main factors thought to affect the drop in input prices was the decrease in the price of crude oil.
According to the ONS the rise in output prices was due to an increase in the price of chemicals and pharmaceuticals, while cheaper petrol offset a greater overall increase. The improved outlook for price inflation will be a welcome relief for the Bank’s Monetary Policy Committee, which is hoping the cost of living will start falling this year and next.
Samuel Tombs, UK economist at Capital Economics, said: “August’s producer prices figures provide the strongest indication yet that cost pressures in the industrial sector have peaked. Barring a renewed surge in oil prices, input price inflation should fall rapidly over the coming months and be back down to single-digits by the end of the year.”