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U.K. Companies Costs Fell More than Expected Last Month

Reuters
Monday, 10 Sep 2007 | 5:07 AM ET

British firms' costs fell more than expected in August, while prices at the factory gate rose as forecast, official data showed on Monday.

The Office for National Statistics said input prices fell 0.5% in August, below analysts' forecasts for a 0.2 % decline. That left the annual rate of input price inflation at 0.7%.

Output prices rose 0.1% on the month for an annual rate of 2.5%, broadly as expected by economists. Core output price inflation also came in as forecast, up 0.2% on the month for an annual rise of 2.4%.

The figures suggest pipeline inflation pressures remain under control and will likely reinforce expectations that interest rates have peaked.

The Bank of England left borrowing costs on hold at 5.75 % last week and policymakers said they are keeping a close eye on the current financial market unrest.

The ONS said the fall in input prices mainly reflected falls in crude oil, fuel and metal prices. But input price falls were partly offset by a rise in home produced food prices, with the price of cereals affected by tight global supplies and the prospect of reduced yields because of wet weather.

It also said any impact from foot-and-mouth disease in August was minimal because the outbreak had been so small and localized.