UK producer prices slip in December, with little pressure in the pipeline

Factory gate deflation eased at the end of 2015, but still large drops for input prices pointed to a lack of pressures in the pipeline, economists said.

The price index for UK manufacturer's output fell at a 1.2% year-on-year pace in December, following a drop of 1.5% in the month before, according to the Office for National Statistics.

That was in-line with the average forecast from economists.

So-called 'core' producer prices, which exclude the more volatile food, beverage, tobacco and petroleum products, rose by 0.1% in comparison to a year ago.

Input prices, those charged to UK firms for the materials and fuels they purchase for processing, retreated at a 10.8% year-on-year clip over the year to December 2015 after a fall of 13.1% in the year to November.

Core input prices declined by 7.0% in the year to December 2015, compared with a fall of 8.4% in the year to November 2015.

"The latest producer price figures showed limited pipeline pressures [on the rate of CPI Inflation] [...] Meanwhile, the indirect effects of earlier falls in oil prices on the likes of manufactured goods are still working their way through and we believe that hidden slack in the economy will contain unit labour cost growth."