Factory gate prices rise in September

Prices at the factory gate rose for the first time in five months in
September, with almost all sectors taking part in the unexpected rise,
according to official figures today.

The Office for National Statistics said that non seasonally adjusted output
prices rose 0.5 per cent in September.

It took the annual rate of inflation to 0.4 per cent, the first positive
reading since April. Prices registered a 0.3 per cent fall in August.

Howard Archer, chief UK economist at Global Insight, said: “The
higher-than-expected producer output price data for September are yet
another example of inflation recently being firmer than expected and
suggests that manufacturers may have been trying to take advantage of the
recent overall stabilisation in output to try to improve their margins.”

However, Mr Archer added that it was likely that manufacturers will have to
keep the lid on their prices over the coming months.

“The sharp fall in industrial production in August highlights the fact that
conditions remain difficult for manufacturers; and, with substantial excess
capacity, firms will be under pressure to price competitively to gain
business,” he said.

Analysts had been predicting that factory gate inflation, according to the
monthly Producer Prices Index, would fall by 0.1 per cent last month, amid
continued pressure on prices.

George Buckley, chief UK economist at Deutsche Bank, said: “You could see
inflation start to pick up again in the early part of next year.”

Meanwhile, Britain’s trade gap narrowed from £2.6 billion in August to £2.3
billion in September, although economists said that this was in line with
their expectations.

It was the smallest trade gap since June 2006, but only slightly lower than
deficits in recent months.