Forex News – UK Producer Price(PPI) Index falls more than expected

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The United Kingdom’s Office for National Statistics released Producer Price Index (PPI) data today. PPI measures the change in the price of goods and raw materials purchased by manufacturers.

Between November and December the total input price index fell 0.6 per cent from a previous 0.3 percent increase. PPI output fell by 0.2 percent from 0.2 percent growth. Producer output price inflation slowed to 4.8 percent on the year from 5.4 percent in November, a bigger drop than the fall to 5 percent forecast by economists and the lowest rate since December 2010.

The drop in producer price inflation was driven by the first month-on-month decline in prices since June 2010, and is likely to be sustained as input price inflation tumbled to an annual rate of 8.7 percent from 13.6 percent the month before.

Factory gate inflation overall dropped more than expected in December, boosting expectations that the Bank of England will inject more stimulus into the struggling economy soon.

The BOE stopped short of announcing an expansion to its quantitative easing program on Thursday, but is widely expected to do so in February when it completes its own assessment of growth and inflation.