Commodities

Friday November 6, 10:10 AM
INSTANT VIEW 4-UK input prices stronger than expected in Oct

LONDON, Nov 6 (Reuters) - Annual input price inflation for British manufacturers unexpectedly turned positive in October for the first time since February, driven by a rebound in crude oil prices, official data showed on Friday. Producer output price inflation rose at its fastest pace since March, broadly as expected. The figures suggest pressures are building up at the start of the inflation pipeline. ******************************************************* KEY FIGURES FOR OCT PRODUCER PRICES DATA MM YY Output prices nsa 0.2 1.7 Core (Berlin: LJ1.BE - news) output prices sa 0.3 2.0 Input prices nsa 2.6 0.1 CONSENSUS FORECASTS (IN PCT) MM YY Output prices nsa 0.3 1.8 Core output prices sa 0.2 2.0 Input prices nsa 1.5 -1.3 FOR PREVIOUS PPI STORIES, CLICK ON KEY POINTS - Highest annual rate of producer output price inflation since March - Highest annual rate of core producer output price inflation since April - First annual rise in input prices since February - Highest annual rate of core input price inflation since April - Biggest annual fall in fuel input prices since June 1996 ANALYSTS' COMMENTS JONATHAN LOYNES, CHIEF EUROPEAN ECONOMIST, CAPITAL ECONOMICS 'The figures confirm that pipeline price pressures in the industrial sector are starting to strengthen a bit again after the big falls of the last year or so. 'These rates will almost certainly rise further over the coming months on the anniversary of last year's big energy-driven falls. But it would be wrong to worry about a sustained rise in cost pressures in the economy. For a start, unless energy prices rise much further, the pick-up in PPI should be relatively short-lived and nowhere as big as that seen last year, when input price inflation peaked at 34 percent And second, the lags involved mean that most of the falls of the last year have yet to feed through into consumer prices. Along with the huge amounts of spare capacity in the economy, this process should help to keep core CPI (NYSE: CPY - news) inflation subdued as the headline rate rises over the coming months. In short, no need to worry.' BRIAN HILLIARD, CHIEF UK ECONOMIST, SOCIETE GENERALE (GLE.NX - news) : 'Input prices surging on the back of stronger oil prices, primarily. A little bit higher than we thought but the basic trend is quite straightforward.' 'The surprise is that headline output prices have risen so modestly on such a strong surge in input prices. So some absorption in the margins. I would expect that output prices will reflect that increase a little bit more in the coming months.' 'I think the most important feature of the data is that core output price inflation seems to be on the rise. That is something which will add modestly to the overall inflation trends in the economy. It's a minor concern. There's a lot bigger ones than that. ROSS WALKER, UK ECONOMIST, RBS (LSE: RBS.L - news) 'There is a big base effect story here and that is what bringing about this dramatic jump in the year over year rate on the output side particularly. It would be wrong to over interpret today's jump, it is mainly a base effect.' 'The main significance in these data is just the fact that there seems to be a little bit of stickiness in the core output measures.' 'I don't think we've got an inflation problem but I think these numbers do serve to undermine some of the more exaggerated deflation fears.' PHILIP SHAW, CHIEF ECONOMIST, INVESTEC 'The eye-catching figure is the big jump in input prices on the month, which is so far greater than expectations that the year-on-year change is now in positive territory, albeit just. 'Against that, the output price numbers weren't quite as strong as expected, but even so the report as a whole is a reminder that there is an issue with imported costs coming into the UK, particularly commodity-based price pressures.' AMIT KARA, UK ECONOMIST, UBS (Virt-X: UBSN.VX - news) : 'Input prices are clearly above expectations, but primarily driven by higher oil prices. Output prices are still fairly subdued.' 'From a policy perspective, if anything the MPC (A050540.KQ - news) would prefer to have inflation, so they're not likely to do anything to smother this uptick in pipeline inflation. Historially, though the link between producer price inflation and CPI inflation has been quite weak. It's not something they're going to worry about yet.' Keywords: BRITAIN PPI/