Cheaper 'input prices' hint at inflation fall

Good news on the economy is a rare commodity these days, but today there appeared to be a hint of proof that inflation might be on the way down.

Official producer prices data for last month shows factories are finally paying less for raw materials and energy - known as input prices - fuelling hopes that industrialists would soon start passing those savings on to consumers.

Input prices fell 0.8% in October after increasing 1.8% in the previous month. Falls in crude oil, imported metals and home-produced foods were the main drivers.

Prices of finished products leaving the factory gate have not started falling yet, but they were at least flat on the previous month.

Barclays Capital economist Blerina Uruci said the tough economic climate meant output prices would probably be kept in check and forecast "a marked fall in consumer price inflation during the course of next year".

That is the outcome the Bank of England is hoping for as it pumps billions of pounds into the economy through its quantitative easing programme which critics say will fuel inflation further.

Inflation on the CPI measure is currently running at 5.2% compared with the Bank's central target of 2%.

Surveys have suggested further falls in input costs are on the cards.