Producer prices fell in August. Both output and input price indexes measuring month on month changes went negative in the month just gone. It was the first time the month on month output index has been negative since October 2006.
So, at last, it seems inflation may be turning.
The annual rate of inflation is still too high of course, it will take some time before that goes negative. The year on year change in the input prices incurred by manufacturers fell to 26 per cent in August, from 29.3 per cent in July. As for output prices, the annual rate fell to 9.7 per cent from 10.2 per cent.
Manufacturers saw the price they pay suppliers fall in no less than six of the nine main categories in August. Crude oil was down 11 per cent in the month, but then fuel, home food materials, imported food materials, imported metals and other import materials all fell in cost. Even in the areas where input costs did rise, the jump was quite modest.
The falling price of oil was the main factor behind the improving output index. Over the last 12 months, the price manufacturers have been charging for petroleum products has increased by 28.9 per cent. Yet in August, these same products fell by 4.8 per cent. The item which saw the second highest rate of inflation within the output index, chemical products, however, still rose quite sharply – up by 0.9 per cent in the month.
It is just the first step. We will need to see a couple more data releases like this one from the ONS in October and November, before the change in inflationary pressures becomes obvious.
But it does seem we are seeing the positive consequences of the credit crunch. As has been argued here before, the shortage of credit will mean falling demand, which will lead to falling prices eventually. It has been said here that it is just a matter of time before this starts to happen, and this morning’s data shows that time is at last drawing nigh.
Comments
Trackbacks