RTTNews - Signaling easing inflationary pressures in the British economy, output prices declined in May from the previous year for the first time since July 2002.
Friday, the Office for National Statistics reported a 0.3% year-on-year fall in output prices for all manufactured goods in May, reversing a 1.3% rise in April. This was the first annual decrease since July 2002. Economists were expecting a 0.4% fall for May.
The budget measures announced in April affected the PPI figures. If the changes in excise duty is passed on in full, it is estimated to add 0.1% to the overall output index in May.
The index climbed 0.4% between April and May, reflecting rises in petroleum product prices, other manufactured product prices and tobacco and alcohol. The monthly growth rate matched economists' expectations.
Excluding volatile items, output prices were up 1.2% in the year to May, compared with a 2.5% increase in April. Annual growth in May was weakest since December 2005. Core annual inflation also came in line with expectations.
At the same time, input prices recorded biggest annual fall since November 2001. Prices were down 9.4% versus 5.8% decline in April. The decline in input prices was larger than an 8.3% slump expected by economists.
Further, the ONS said input prices moved up 0.4% in May from the prior month, much slower than the 4.4% increase seen in the same period of the previous year. The increase in crude oil prices were partly offset by fall in fuel prices.
Annual inflation in April had slowed to a level last seen in January 2008 after the economy entered its worst recession since 1979. Consumer price annual inflation stood at 2.3% in April, down 2.9% in the previous month.
On Thursday, the Bank of England retained its key rate at 0.5%, the lowest since the central bank was established in 1694 and decided to continue with its GBP 125 billion bond purchases plan using central bank reserves.
According to a rebased series calculation, construction output volume in the U.K. dropped 9% sequentially in the first quarter. The construction industry contributes around 6% to the overall estimate of GDP and today's data raises the possibility of a downward revision in the first quarter GDP numbers.
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