Price pressures continue to be subdued in UK providing more room for the BOE to keep their nonstandard easing and to hold rates at their historic lows. The Producer Prices today reflected the agony that the MPC face in assessing inflation over policy horizon.
Raw material costs rose slightly in November with 0.1% gain from a revised 2.9% gain in October; taking the annual rise to 4.0% from 0.4%. As for prices at factory gates, the rise remains steady with 0.2% from 0.3% in October and higher 2.9% on the year from 1.9% previous.
Though the details showed that manufactures paid less for petroleum products this month, it still was the most leading gains in output prices, as they struggle to hold the balance amid a slump in demand and low profit margins. This was clearly portrayed in the unexpected drop in core prices that strips the volatility of food and energy products, as prices fell 0.1% on the month to 2.0% annual rise down from 0.4% and 2.2% respectively in October.