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Producer prices continue to moderate in UK

Producer prices are measured in two ways. Firstly, there are input prices which is a measure of those intermediate goods and raw materials which manufacturers need to produce their finished products. And secondly, output prices or ‘factory gate inflation’ which measures the price of finished goods as they leave the factory.

In August, figures just published by the Office for National Statistics show that output prices for all manufactured goods rose by 4.7%. This was not much different from the ‘narrow’ output measure, which leaves out more volatile sectors, and which registered a 4.6% increase. The recent trend can be seen in the figure below.

Source: ONS

The input price annual inflation in August rose by 8.1%, but this can be set against a growth figure of 10.8% in July. There has been a worrying trend in the price inflation of a number of raw materials and it is good to see that this has moderated somewhat. However, what comes in must go out, and unless manufacturers can manage to absorb these higher costs then we will see them feeding through into the Consumer Prices Index in due course.

When we look at the ‘narrow’ input price inflation, the figure fell even further to 6.4% in the year to August.

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Posted in Inflation, Manufacturing

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