The cost of goods leaving British factories fell at a record rate in October from the previous month, official data showed Nov. 10, sparking speculation about even more interest rate cuts.
Producer prices sank by a record 1% in October from September, Britain's Office for National Statistics (ONS) said, as oil and other commodity prices dived on global recession concerns. That was the biggest drop since records began in 1986 and compared with a 0.2% monthly fall in September.
On an annual basis, the ONS added that producer prices increased by 6.8% in October compared with 12 months earlier. That was however a marked slowdown from the 8.5% gain recorded the previous month.
The fall in the monthly rate was "mainly reflecting falls in petroleum and other manufactured products," the ONS said.
Input costs, or the cost of raw materials, for producers sank 5.6% in October compared with the previous month. They rose by 13.8% in October, compared with 12 months earlier. That was the lowest level since December 2007 and was almost half the 24% increase that was seen in September.
Economists said easing inflationary pressures could prompt fresh action from the Bank of England, which chopped its key interest rate by a third last week as Britain heads towards a recession and faces a sharp drop in inflation.
British borrowing costs were slashed to 3% on Nov. 6, the lowest level in more than half a century following a cut of 1.5 percentage points -- the biggest reduction since 1981. "With price pressures fading this rapidly, there is nothing to stop the (BoE) from slashing interest rates all the way to 1% or so," predicted Capital Economics analyst Paul Dales.