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Inflation slows at factory gate

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The pace of so-called ‘factory gate’ inflation slowed down in April, with a lid kept on the cost of raw materials, leading analysts to predict that the Bank of England may not feel impelled to raise interest rates as high as previously feared.

According to figures from the Office for National Statistics the cost of output goods increased by 2.5% over the year to April – representing a fall from 2.7% for the year to March.
Most of the increase was down to hikes in petrol, tobacco and alcohol prices.
Adam Cole, senior currency strategist at RBC Capital Markets said that the factory gate prices data has taken on greater significance of late “as the Bank of England has begun to focus on pricing power and gross margin expansion as a potential source of inflation pressure.”
“As such, these data provide some relief that manufacturers are not making price increases stick quite as easily as it appeared in March,” he added.

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