UK September Factory Gate Inflation Highest Since April

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UK factory gate inflation turned positive in September after staying negative for four consecutive months.

According to a report released on Friday by the Office for National Statistics, output prices rose 0.4% in September from the previous year, in contrast to a 0.3% fall in August and an expected 0.1% decline. Also, this was the highest annual rate since April. "Changes to excise duty on petroleum products are estimated to have added 0.2 per cent to the overall index in September", said ONS.

Output price inflation, excluding food, beverages, tobacco and petroleum, was also the highest since April. The index was up by an annual 1.4% in September compared with a rise of 0.8% in August. This index is not affected by changes in excise duty.

Reflecting price rises in petroleum and other manufactured products, overall output prices climbed 0.5% month-on-month, larger than the 0.3% increase seen in August. The result also exceeded the 0.1% rise expected by economists.

At the same time, the input price index for materials and fuels purchased by manufacturing industry fell at a slower pace of 6.5% annually in September, following a 7.7% drop in August. The decline in September was slower than the expected 6.8%.

On the other hand, input prices slipped 0.5% between August and September, reversing the 2% increase seen in the prior month. Consensus forecast was for a 0.8% drop. The monthly fall in the input index mainly reflected price falls in crude oil, and to a lesser extent fuels.

Yesterday, the Bank of England retained its key interest rate at a record low of 0.5% and decided to continue its GBP 175 billion asset purchase programme. The central bank expects its quantitative easing programme to take another month to complete.

Separately, the ONS reported a fall in UK's visible trade deficit in August. The visible trade deficit narrowed to GBP 6.2 billion in August from a revised deficit of GBP 6.4 billion in July. Economists had forecast a GBP 6.3 billion deficit. Exports fell 0.6% month-on-month and imports dropped 1.2%.

The deficit with non-EU countries narrowed to GBP 3 billion in August from GBP 3.9 billion in July. At the same time, trade with EU nations showed a shortfall of GBP 3.2 billion versus July's GBP 2.5 billion deficit. Total trade balance in August resulted in a deficit of GBP 2.3 billion in August, compared with a revised deficit of GBP 2.6 billion in July.

UK factory gate inflation turned positive in September after staying negative for four consecutive months. (Market News Provided by RTTNews)