Raw material costs falling, factory gate data reveals

The figures showed a welcome fall in raw material prices, notably oil. However, although input costs were still 14.1% higher than a year ago, that compared with 17.7% in September and was the weakest annual rate of increase since December 2010. Markit economist Chris Williamson said that the fact that costs had fallen 0.5% in the latest three months, had allowed producers to keep their average selling prices unchanged in October. Prices charged for products sold 'at the factory gate' were up 5.7% on a year ago, the lowest rate of increase since May and down from 6.3% in September. "Further downward pressure on manufacturing input costs and selling prices is likely in coming months as slowing global demand for commodities mean an increasing shift to a buyers' market for many goods, and earlier steep price rises fall out of year-on-year comparisons," Williamson went on. "This is goods news in some respects, as falling manufacturing and commodity prices should feed through to lower consumer price inflation in coming months. The recent squeeze on household incomes should therefore become less intense and help to support consumer spending, in line with the Bank of England's expectations. However, he warned that price falls were a symptom of very weak global demand, and merely highlighted the difficulties that manufacturers and their suppliers were facing.