U.K. Producer Prices Follow Oil Lower

U.K. factory gate prices fell for a 4th consecutive month in November, further evidence that inflationary pressures are easing rapidly as the economy slows, data from the Office for National Statistics showed today. Output prices fell 0.7% on a month-to-month basis and were 5.1% higher on a year-to-year basis, the weakest annual rate of increase since Dec. 2007. In Oct., output prices fell a record 1% on a monthly basis, leaving them a revised 6.7% higher on an annualized basis. Economists were expecting a 0.9% drop on a month-to-month basis and 5.1% rise on the year in Nov., according to a Dow Jones Newswires survey. The data are likely to support expectations that the Bank of England will cut its main interest rate to its lowest level since the central bank was founded in 1694. The bank's Monetary Policy Committee has slashed rates by three percentage points since early October, leaving the rate at 2%. Nevertheless, gilts, stocks, and the pound were little moved by the producer-price data. The ONS said the fall in output prices was driven by an 8.3% drop in petro product prices, the sharpest monthly slide since records began in 1986. But some of that fall was offset by a 1.1% increase in transport-equipment product prices. Excluding volatile food, beverages, tobacco and petroleum prices, output prices rose 0.2% on a monthly basis and 5.1% on an annualized basis. Weaker crude oil prices also helped fuel a 3.3% drop in the input price index in Nov., leaving them 7.5% higher to the year, the weakest annual rise since Sept. 2007. Input prices have dropped for five months in a row, the longest run of falls since the 2nd half of 2001. Economists were expecting input prices to fall 3% on a month-to-month basis and rise 6.5% on a year-to-year basis. In October, input prices fell a revised 4.3% on a monthly basis and were up 15.4% on an annualized basis.