Record fall in UK producer prices

UK manufacturers have seen prices of fuel and materials decline

The cost of goods leaving UK factories fell by 1% in October from September, the biggest monthly decline on record.

The decrease, which was helped by the recent fall in oil prices, cut the annual rate of output price inflation to 6.8% from 8.5% in September.

Annual inflation in input prices - what firms pay for materials and fuel - fell to 13.8% in October from 24%.

Analysts said the figures indicated that inflationary pressure in the economy were now waning sharply.

The rapid fall in output prices indicates consumer price inflation is set to tumble Hetal Mehta, senior economic advisor, Ernst & Young Item Club

"The producer price data are really eye opening" said Howard Archer of Global Insight.

"Just as we saw very sharp rises earlier in the year, we are now seeing deep declines", he added.

Last week, the Bank of England slashed interest rates to 3% from 4.5% - a much greater cut than had been anticipated - in an attempt to boost the economy and avert a recession.

The sharp falls in oil and other commodity prices in the past few months have helped to push input price inflation below 20% for the first time since December 2007

Hetal Mehta, senior economic advisor to the Ernst & Young Item Club, said: "The rapid fall in output prices indicates consumer price inflation is set to tumble".

"The Bank of England has room to cut interest rates even further."