UK factories cut prices, helping BoE's inflation fight

Worker prepares pieces of metal to be galvanised inside the factory of Corbetts The Galvanizers in Telford
A worker prepares pieces of metal to be galvanised inside the factory of Corbetts The Galvanizers in Telford, Britain, June 28, 2022. REUTERS/Phil Noble

LONDON, Jan 25 (Reuters) - Britain's manufacturers unexpectedly reduced their prices in December by the most since April 2020, welcome news for the Bank of England which is weighing up how much higher it needs to take interest rates to fight soaring inflation.

Output prices fell by 0.8% in December from November, the Office for National Statistics said on Wednesday.

Input prices paid by factories fell by 1.1% in month-on-month terms, also the biggest drop since April 2020, when much of Britain's economy shut down at the start of the coronavirus crisis, the ONS said.

Economists polled by Reuters had expected producer output prices to rise by 0.3% on a monthly basis, and for input prices to fall by 0.6% month-on-month.

Britain's main inflation measure - the consumer prices index - fell in November and December but at 10.5% it is more than five times the BoE's target.

The central bank is watching for signs of future inflation pressure. Investors expect the BoE to raise interest rates for a 10th time in a row on Feb. 2 with most pricing in another half-percentage-point increase to 4%.

The ONS producer price inflation data for November and December was published later than unusual after the statistics office detected problems with the prices data it uses.

In annual terms, output prices rose by 14.7% in December, its fifth consecutive slowing, and input price growth was 16.5%, its sixth straight slowdown from a record high of 24.6%.

In November, output prices fell by a monthly 0.1% and rose by an annual 16.2% while input prices in November fell by 0.2% and rose by 18.0% respectively, the ONS said.

It said the impact of revisions relating to its data corrections - going back to January 2021 - on headline indices was small.

Writing by William Schomberg; editing by William James

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