UK Manufacturers Help BoE’s Inflation Battle with Price Reductions

LONDON, Jan 25 – The Bank of England received some relief in December as manufacturers in Britain unexpectedly decreased their prices, marking the biggest drop since April 2020.

According to the Office for National Statistics, output prices dropped by 0.8% from the previous month. Additionally, the prices factories paid for inputs also decreased by 1.1%, the largest decline since the beginning of the coronavirus crisis.

This news comes as the Bank of England weighs the decision of how much to raise interest rates to combat inflation.

Economists surveyed by Reuters predicted that the output prices of producers would increase by 0.3% on a monthly basis and that the input prices would decrease by 0.6% month-on-month.

In the UK, the consumer prices index, which is the main measure of inflation, dropped in November and December, but it still remained at a high of 10.5%, which is more than five times the target set by the Bank of England (BoE).

The BoE is closely monitoring any potential signs of future inflationary pressures. Investors anticipate that the BoE will raise interest rates for the tenth consecutive time on February 2nd, with most predicting another 0.5% increase to 4%.

The Office for National Statistics (ONS) delayed the release of producer price inflation data for November and December due to issues with the price data they use.

The output prices in December increased by 14.7% on an annual basis, marking the fifth consecutive decrease.

Additionally, the input prices in December grew by 16.5%, which is the sixth consecutive slowdown from a previous high of 24.6%.

In November, the output prices decreased by 0.1% on a monthly basis and increased by 16.2% on an annual basis. The input prices in November also decreased by 0.2% and increased by 18.0%, according to the ONS.

The revisions to its data corrections – which date back to January 2021 – had a minimal effect on the headline indices, according to the statement.