The prices charged by UK manufacturers fell by 0.4% from May to June this year, compared with a fall of 0.2% between April and May, the Office for National Statistics (ONS) reported today.
This is the largest monthly fall since November 2008, when the Producer Price Index index fell 0.7%. The main contributors to the monthly fall in June were petroleum products, chemical & pharmaceutical products and clothing, textile & leather products. These falls were slightly offset by a price rise in other manufactured products.
Annual inflation in factory gate prices stood at 2.3% in June, down from 2.9% in May and the lowest rate since October 2009, when the index rose by just 1.5%.
If retailers decide to pass on the lower prices to shoppers it could impact on the Consumer Price Index, which is the key measure used by the Bank of England. At present CPI inflation is at 2.8%, above the central bank’s target of 2.0%.
On Thursday the Bank of England announced that it would inject a another GBP50bn into the UK economy over the next four months in an effort to stimulate growth. The Bank said that without further monetary stimulus it was more likely that inflation would fall below the target rate.
The ONS statistics also reveal that the prices paid by UK manufacturers for their materials and fuels fell by 2.2% between May and June, slower than the fall of 2.6% between April and May. Impacting on the fall in this ?price index were lower prices for crude oil, imported metals and fuels, although these falls were slightly offset by a price rise in home produced food.
In the year to June the input price index was down 2.3%, compared with no movement last month. The ONS noted that the last time the annual rate was lower was in September 2009, when the index fell 6.1%.