Factory gate prices in steep fall

Prices of goods from UK factories are falling at the fastest rate since 2001

The cost of goods leaving UK factories in June fell at the fastest annual rate for eight years as demand remains weak in the recession, figures have shown.

Output prices fell 1.2% on June last year, compared with a 0.3% fall in the year to May. Analysts had forecast a 0.8% decline.

The Office for National Statistics (ONS) said the drop mainly reflected declines in chemical prices.

Input prices fell 11% annually but rose 1.5% on the month as oil prices rose.

"The clear message is that, despite some tentative indications that conditions in the manufacturing sector have started to improve a bit, producers are under intense pressure to cut their prices," said Jonathan Loynes, chief European economist at Capital Economics.

"Needless to say, this bodes well for a fall in core consumer price inflation further ahead."