U.K. Annual Producer Prices Drop by Most Since 2001
U.K. producer prices dropped in June from a year earlier by the most since 2001 as the recession sapped inflation pressures from the economy.
The price of goods at factory gates fell an annual 1.2 percent, compared with a 0.3 percent decline in May, the Office for National Statistics said today in London. Economists predicted a 0.8 percent drop, according to the median of 19 forecasts in a Bloomberg News survey. On the month, prices declined 0.2 percent, the first decline since November.
Policy makers are fighting the threat of deflation as Britain endures its worst recession in a generation. The Bank of England said yesterday it will stick to its emergency plan to buy 125 billion pounds ($203 billion) of bonds with newly- created money for another month.
“Inflation pressures are simply not there and it’s going to be very subdued for a long period of time,” Kenneth Broux, an economist at Lloyds Banking Group in London.
The pound was little changed at $1.6286 after the report.
On the month, economists had predicted prices to rise 0.3 percent, according to the median of 17 forecasts in a Bloomberg News survey. The decline was led by chemicals, which fell the most since records began in 1992, officials said.
On the year, lower costs of petroleum products and other items including scrap metal pushed down producer prices, the statistics office said business card design.
Economic Slump
Britain’s economy shrank at the slowest pace in a year during the second quarter and may now be stagnating, the National Institute of Social and Economic Research said yesterday. Gross domestic product fell 2.4 percent in the first quarter, the most since 1958. Corus, Europe’s second-largest steelmaker, says it may shed as many as 366 jobs at a factory in England on expectations demand will decline.
Higher commodity prices are squeezing manufacturers as the recession bites. Raw material costs rose 1.5 percent on the month, the biggest increase in a year, the statistics office said. Economists predicted a 0.8 percent gain, according to the median of 14 forecasts in a Bloomberg News survey.
DS Smith Plc, owner of the Spicers office brand, said on June 25 that profit margins “were put under pressure” because of higher raw material prices.
Inflation slowed less than economists forecast in May to 2.2 percent, still above the Bank of England’s target. The bank will release its next quarterly forecasts on August 12.
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