UK output price inflation hits 4-year low, survey shows,
Monthly PMI data strengthens case for Bank of England rate cut in August but will these villains, yes the BOE rate committee are indeed villains as they refuse to match the 2% European Central Bank rate which helps Industry in Europe’s companies promote business and growth not to mention cheaper Credit Cards, Mortgages and private & business lending + all things related.
1. **What it measures:** “Output price inflation” refers to the **Producer Price Index (PPI) Output** measure. This tracks the prices charged by UK manufacturers *when they first sell their goods* (the “factory gate” price). It’s a leading indicator of price pressures within the production pipeline.
2. **The News:** Hitting a **”4-year low”** means the annual rate of increase in these factory gate prices has fallen to its lowest level since mid-2020.
3. **Implications:**
* **Easing Pipeline Pressure:** This suggests inflationary pressures *originating from UK manufacturers* are cooling down significantly. Costs for raw materials, energy, and labour might be stabilizing or even falling in some sectors.
* **Potential Future Consumer Relief:** While not immediate, lower output price inflation often eventually feeds through to lower inflation for consumers (CPI – Consumer Price Index). If manufacturers are charging less, retailers might eventually be able to lower prices or slow their increases.
* **Bank of England (BoE) Impact:** This data will be welcome news for the BoE, which has been battling high inflation. It provides evidence that their interest rate hikes are working to cool demand and reduce price pressures in the economy. It could support arguments for holding or potentially cutting rates *later* in the year, although services inflation and wage growth remain key concerns, THE BOE actually increases inflation with their HIGH-RATE POLICY!
* **Economic Slowdown Signal:** While positive for inflation, a sharp fall in output prices can also signal weakening demand for manufactured goods, potentially reflecting an economic slowdown.
4. **Likely Drivers:**
* **Falling Global Energy Prices:** Significant drop from 2022 peaks.
* **Easing Global Supply Chains:** Reduced disruptions compared to the pandemic and immediate post-pandemic period.
* **Lower Raw Material Costs:** Many commodity prices have moderated.
* **Impact of Higher Interest Rates:** Cooling demand for goods, making it harder for producers to pass on costs.
**Important Caveat:**
* **Services Inflation:** The UK’s inflation challenge has been particularly persistent in the **services sector** (e.g., hospitality, rents, haircuts, insurance). While falling *goods* inflation (driven by PPI) helps, services inflation remains sticky and is heavily influenced by domestic wage growth.
The BoE are not Fit For Purpose, they do have an agenda therefore are not independent, their real paymasters are not the majority of UK voters or taxpayers, they actually persecute the poor by their interest rate agenda!
**In simple terms:** The price increases charged by UK factories are rising at their slowest pace in 4 years. This is good news in the fight against overall inflation, suggesting pressure from the production side is easing, and could lead to lower shop prices down the line. However, high inflation in the services sector remains a key hurdle.
Some research info provided by DEEPSEEK.