UK factory gate inflation below forecast

British factory gate inflation was slightly weaker than expected in June, but firms' costs stayed strong as oil prices picked…

British factory gate inflation was slightly weaker than expected in June, but firms' costs stayed strong as oil prices picked up, official data showed today.

The Office for National Statistics (ONS) said output prices rose 0.2 per cent on the month in June, taking the annual rate to 2.4 per cent. That was slightly below analysts' forecasts for an annual 2.6 per cent, and the same as May's downwardly revised reading.

The core measure - which excludes food, drink, tobacco and petroleum - also posted a weaker-than-expected 0.2 per cent rise on the month, taking the annual rate down to 2.1 per cent - the weakest since September 2006. Both these readings were below analysts' forecasts.

The Bank of England is concerned about firms' growing pricing power, and the figures boosted short sterling interest rate futures. Nevertheless, the market is still pricing in rates at 6 per cent by the end of this year.

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Input price inflation remained strong, rising for a fifth consecutive month due to a pick-up in oil prices, which rose 6.6 per cent on the month.

Input prices rose 0.6 per cent on the month, slightly weaker than the 0.8 per cent forecast after an upwardly revised 1.4 per cent rise in May.

Year-on-year, input prices rose 2.1 per cent, the highest since December and slightly above forecasts.