UK Producer Prices Fall Sharply
07/06/2012| 04:52am US/Eastern
By Alex Brittain and Ainsley Thomson
LONDON--The prices charged by U.K. manufacturers fell at the steepest month-to-month rate in three-and-a-half years in June, giving a strong signal that headline U.K. inflation will fall further in the coming months.
Producer output prices fell 0.4% in June from May, the biggest drop since November 2008, the Office for National Statistics said Friday. That left annual inflation at the factory gate at 2.3%, down from 2.9% in May and the lowest rate since October 2009.
The drop in producer prices could be replicated in consumer prices--the Bank of England's preferred inflation measure--if retailers opt to pass the savings on to shoppers.
Falling inflation would give the BOE more scope to ease monetary policy to support growth. The BOE Thursday voted to pump a further 50 billion pounds ($77.8 billion) into the economy as part of its stimulus program of asset purchases known as Quantitative Easing.
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