Factory gate inflation eases

British factory gate inflation eased in June as lower oil prices pushed input costs down at the fastest annual pace since September 2009, data showed.

With inflation falling the Bank of England voted on Thursday to pump an extra £50bn into markets to revitalise an economy that fell back into recession at the turn of the year and shield Britain from any spillover from the ongoing euro zone crisis.

The Office for National Statistics said producer output prices rose 2.3 percent on the year, the lowest inflation rate since October 2009, and below forecasts for a 2.4 percent rise.

Input prices tumbled 2.3 per cent on the year, the sharpest annual fall since September 2009. The fall was slightly larger than the forecast in a Reuters poll for a 2.1 percent drop.

The figures lend support to the Bank forecast that inflation - which fell to a 2-1/2 year low of 2.8 percent in May - will continue to decline towards its 2 percent target.

Companies had to pay 9.1 per cent less for crude oil than in May. This was the sharpest monthly drop in crude oil prices since December 2008. Prices for fuel and imported metals also fell on the month.

Service sector firms, which make up the bulk of Britain's economy, cut their prices for the second month running in June to drum up business, despite input costs rising at a faster p ace, business surveys showed earlier this week.

Shop price inflation fell to its lowest rate in 2-1/2 years last month as weak demand pushed retailers to offer deep discounts, the British Retail Consortium said on Wednesday.