Factory input costs fall but prices stay high

Prices for manufactured UK goods stuck at a record high in August despite a fall in the costs of raw materials as fuel costs dipped, official data shows.

Factory gate inflation stayed at July's upwardly revised reading of 6.1 per cent, the highest annual rate since October 2008.

Analysts had forecast a 5.9 percent increase.

The Office for National Statistics said input prices fell 1.9 per cent on the month, a bigger drop than expected, as energy costs declined.

That took the annual rate of input price inflation to 16.2 per cent, the lowest annual increase since March.

The price of crude oil inputs fell by 5.9 per cent on the month, the biggest drop since May, although the cost of oil is still up 35.7 per cent on a year ago.

"Input price pressures appear to have eased slightly; however, the extent of the fall is not as large as had been suggested by the manufacturing PMI survey and we expect more easing in input price pressures in the coming months, which should eventually feed into lower producer price inflation," said Barclays Capital analyst Blerina Uruci.

There were also big annual rises in the costs of imported food, parts and equipment, and other materials.

The slowing pace of input price inflation may give some limited comfort to the Bank of England, which held interest rates at 0.5 per cent at its monthly meeting this week.

But the central bank left open the possibility it may restart its quantitative easing programme should the economy weaken further.